Argentina’s Merval Maintains Upward Trend; US Markets Close Higher

Mexico’s and Peru’s markets closed lower on Wednesday, while US stocks rose as investors await Federal Reserve chairman Jerome Powell’s speech on Friday

Traders work on the floor of the New York Stock Exchange (NYSE). Photo by Spencer Platt/Getty Images
By Bloomberg Línea and Bloomberg News
August 24, 2022 | 06:54 PM

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A roundup of Wednesday’s stock market results from across the region

👑 Argentina leads again in Latin America:

Argentina’s stock market continues its upward trend, and once again led the gains among its Latin American peers. The Merval index (MERVAL) advanced with strong gains by shares of Banco Bbva Argentina (BBAR), Transportadora Gas del Norte (TGNO4) and Transener (TRAN).

Rava Bursátil has highlighted the bullish behavior after the appointment of the Argentine government’s Minister for Economic Programming, Gabriel Rubinstein, and after the Central Bank increased its international reserves by purchasing $140 million.

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Brazil’s Ibovespa (IBOV) also closed with gains on Wednesday, after the biweekly inflation figure recorded its biggest drop since records have been kept following the decisions taken by President Jair Bolsonaro’s government to try and tackle the rising cost of living.

📉 A bad day for Mexico’s BMV:

Mexico’s stock exchange saw the sharpest losses in Latin America on Wednesday. Mexico’s S&P/BMV IPC (MEXBOL) was dragged down by losses in the raw materials, finance and basic consumer goods sectors.

Shares of Grupo Elektra (ELEKTRA*), Grupo México (GMEXICOB) and Arca Continental (AC*) were among those with the sharpest losses.

Inflation rose to 8.62% in the first half of August, according to data released Wednesday by statistics bureau INEGI, above analysts’ forecasts of 8.5%.

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“The acceleration of inflation remains despite the Bank of Mexico’s determined efforts to contain it,” analysts at Intercam wrote in a note. “It is likely that more remains to be done, given that inflation still shows no signs of having reached a peak.”

🗽 On Wall Street:

Stock traders remained hesitant to make any huge wagers ahead of Jerome Powell’s speech on Friday, which may provide clues on how hawkish the Federal Reserve will be in the face of mounting economic challenges.

After wandering aimlessly earlier Wednesday, the S&P 500 notched a small gain. For a second day in a row, its swing was capped within 1%. Such a stretch of intraday calm occurred only three other times in 2022. Tesla Inc., which is getting ready to trade on a split-adjusted basis Aug. 25, pared most of its rally. Treasury 10-year yields remained above 3% on bets the Fed will continue to lean toward tighter policy.

The S&P 500 climbed 0.29%, the Dow Jones Industrial Average 0.18% and the Nasdaq Composite (CCMPDL) 0.41%.

In the run-up to the all-important Jackson Hole annual conference that will be attended by Powell and policy makers from around the world, traders had to digest more hawkish talk. Fed Bank of Minneapolis President Neel Kashkari said late Tuesday it’s “very clear” that officials need to tighten and bring inflation back under control.

“We don’t expect any shock-and-awe, Volcker-style, hyper-aggressive articulation by Powell or anyone else for that matter,” said Troy Gayeski, chief market strategist at FS Investments, referring to former Fed Chair Paul Volcker, who tipped the economy into recession to conquer inflation in the 1980s. “However, it’s very clear that the rally since the June bottom works directly against what the Fed has been trying to achieve, which is tighter financial conditions to slow economic growth and slow inflation.”

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Economic reports have been mixed at best, underlining the delicate task policy makers face in bringing down high inflation without sparking a recession. Data Wednesday showed US pending home sales fell to the lowest since the start of the pandemic. While orders placed with US factories for core capital goods beat forecasts, the picture might change in the coming months amid higher borrowing costs and uncertainty about the growth outlook.

Central banks that hike borrowing costs too aggressively to tame supply-driven inflation risk exacerbating price gains, according to Nobel laureate economist Joseph Stiglitz. Meantime, Guggenheim Partners Chief Investment Officer Scott Minerd is warning investors away from junk bonds and stocks because slowing economic growth and higher interest rates likely will produce deeper losses in risk markets.

On the currency markets, the Bloomberg Dollar Spot Index was little changed, the euro was unchanged at $0.9970, the British pound fell 0.3% to $1.1799, and the Japanese yen fell 0.2% to 137.10 per dollar

🔑 The day’s key events:

Oil prices had a volatile day amid advances in the negotiations for a possible nuclear agreement with Iran and the inventories report from the U.S. Energy Information Administration (EIA).

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Investors are closely watching the possibility of a deal being announced that could bring Iranian oil back to the market. The United States sent its response to the European Union’s latest proposal today, State Department spokesman Ned Price said.

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Hours later, Nasser Kanaani, spokesman for Iran’s Foreign Ministry, said they had received the response and would comment once the evaluation is completed, Bloomberg reported.

Although higher supply could hit prices, the market also digested the EIA report that showed U.S. crude stockpiles fell amid record oil exports, a sign that demand remains strong.

🍝 For the dinner table debate:

This Wednesday marks six months since Russian President Vladimir Putin ordered the invasion of Ukraine, starting a war that not only created a humanitarian crisis, but has also had a notable economic impact.

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The war has left more than six million refugees, more than 5,000 civilians dead and a global crisis, the second in less than two years since the Covid-19 pandemic was declared.

On the economic level, the increase in the prices of raw materials, its impact on inflation and the response of central banks to tackle the rise in the cost of living, has led the main multilateral organizations to deliver a bleak outlook for 2022, just when the economies were beginning to recover from the blow of the virus.

Europe, given its heavy dependence on Russian gas, has seen energy prices hit record highs, and has been hit by falling consumer confidence and the euro has lost strength against the US dollar.

-- Carlos Rodríguez Salcedo, a content producer at Bloomberg Línea, and Rita Nazareth of Bloomberg News, contributed to this report.