A roundup of Tuesday’s stock market results from across the Americas
🌎 Argentina’s Merval bucks LatAm downward trend:
Only Argentina’s Merval (MERVAL) closed higher in Latin America on Tuesday, climbing 0.53%, with the shares of Banco Macro (BMA) gaining 4.57%, while YPF (YPFD) shares gained 3.81% and those of Edenor (EDN) 2.76%.
Mexico’s Mexbol index (MEXBOL) dropped 0.64%, with losses in the real estate and health sectors, while the shares of Megacable Holdings (MECACPO) dropped 6.32%, of Industrias Peñoles (PENOLES) 5.01% and Corporación inmobiliaria Vesta (VESTA*) were down 3.38% at closing.
Lima’s stock index (SPBLPGPT) closed 0.26% lower, dragged down by the shares of Volcan (VOLCABC1), which dropped 6.10%; Southern Copper Corporation (SCCO), which shed 3.89%, and Sociedad Minera El Brocal (BROCALC1), which declined 3.64%. Other shares to tumble were those of Pomalca (POMALCC1) and Cementos Pacasmayo (CPACASC1).
🗽On Wall Street:
US stocks fell and short-dated Treasury bills extended losses as negotiations over raising the US debt ceiling remained at an impasse.
Negotiations continued Tuesday. However, progress appeared limited, with some House Republicans questioning the urgency of a deadline imposed by Treasury Secretary Janet Yellen for when the government will start missing debt payments.
Investors have been demanding higher premiums to hold US debt, especially those at the highest risk of default, with little time left for politicians to find an agreement. Yields on securities maturing June 6 topped 6% Tuesday compared to bills maturing May 30 that are yielding about 2%.
“The fact that some of these politicians are contemplating default publicly is a bad sign,” said Mike Zigmont, head of trading and research at Harvest Volatility Management.
The S&P 500 fell 1.1%, led lower by industrials and communication stocks. Lowe’s Cos. cut its sales outlook, citing a slowdown in consumer spending. Broadcom Inc. signed a multibillion-dollar deal with Apple Inc. to develop 5G radio frequency components. And a rout in luxury-good makers including Hermes International wiped out more than $30 billion in value.
The Nasdaq Composite dropped 1.26% and the Dow Jones Industrial Average 0.69%.
President Joe Biden and House Speaker Kevin McCarthy called their discussions on Monday productive. But an agreement on the debt limit remains elusive, with McCarthy pleading with Republicans to stay united on their demands in order to avert a US default.
“As investors, it’s really hard to price the debt ceiling,” said Remi Olu-Pitan, head of multi-asset growth and income at Schroders. “We have nothing to hold onto. We know that it’s a big risk, but it’s really hard to quantify and position for in advance.”
Invesco Chief Global Market Strategist Kristina Hooper said she sees a brief technical default as a real possibility, which is more likely to be reflected in bond prices, rather than stocks.
“The negotiating parties have gotten more pessimistic,” she said. “And it suggests to me that we’ll see more market turbulence in coming days.”
In economic news, US new-home sales unexpectedly rose to a more than one-year high, and US business activity grew in May by the most in over a year.
Minneapolis Fed President Neel Kashkari said Tuesday that if inflation were to become more entrenched, the Federal Reserve could keep interest rates elevated for longer.
Minutes expected Wednesday from the last Federal Open Market Committee meeting will offer traders the latest insights into whether interest rates will be paused at the Fed’s next meeting in June.
“While a pause might not strictly translate to terminal, it goes without saying that the bar to restart hikes will be very high in the current environment,” BMO strategist Ian Lyngen wrote in a note.
The Bloomberg Dollar Spot Index rose 0.2%, the euro fell 0.4% to $1.0768, the British pound fell 0.2% to $1.2410 and the Japanese yen was unchanged at 138.60 per dollar.
🍝 For the dinner table debate:
A public-private partnership to buy a bank? That is what the President of Mexico, Andrés Manuel López Obrador wants to do.
AMLO said the government is keeping the door open to the possibility of buying Banamex in a public-private partnership if Grupo México withdraws from the deal, but which has already been given the green light.
AMLO referred to the issue after a Mexican columnist stated that Germán Larrea, the owner of Grupo México, was about to desist from the purchase of said bank, which is valued at around $7 billion.
“The Mexican people would be interested in owning shares and the government would put up another amount so that there would be a majority, and there is no loss because it is a round business”, said the Mexican president.
Bloomberg Línea learned from representatives of Grupo México that the process of a possible purchase of Banamex is still underway, and for the moment there is no sign that the company is abandoning this operation.
Paola Villar S., a content producer at Bloomberg Línea, and Emily Graffeo and Cristin Flanagan of Bloomberg News, contributed to this story.