A roundup of Thursday’s stock market results from across the region
👑 Latin America’s Leader:
The positive performance of the US stock markets spread to practically all Latin American markets on Thursday.
Argentina’s Merval (MERVAL) led the gains again and closed with an increase of over 7%, marking its best day since 2020.
Shares of Byma (BYMA), Pampa Energía (PAMP), Banco Bbva Argentina (BBAR), Transportadora de Gas del Sur (TGSU2) and Cresud (CRES) were among the best performers of the day.
Byma’s performance, according to Priscila Bruno, an analyst at Rava Bursátil, “is due to the good balance sheet presented during the last quarter, and to the dividend payment to be made on July 11″.
However, for Bruno, this optimistic scenario takes place in a context “without certain reasons”, in the midst of economic uncertainty.
Bull Market Brokers’ analysts explained that the rise of the Merval is very important, but it is an increase that does not tell the whole truth, because it is given in local currency.
“Today the Argentine peso depreciated sharply, the value of the dollar jumped by almost 6.5% and this practically explains the rise of the index,” they said.
They added that the energy sector had a positive performance, “but the reality is that Argentine companies are not going through a good moment (...). In Argentina we are having currency shortage problems as a result of rationing policies of the central bank, and this is hindering the productive apparatus”.
Bull Market Brokers’ analysis insists that stocks were benefited by a specific sector, but today’s historical increase is justified more by the rise of the exchange rate.
“It is a rise that is a lie, because it is measured in local currency and has more to do with a specific sector of the economy.”
Gustavo Neffa, director of Research for Traders, agreed that the rise of the Argentine stock market is explained by the increase in the exchange rate.
He assured that the market became “a great exchange house (...) it is a hedge against the exchange rate risk. Basically, many companies have assets abroad that are revalued, or exports that did better, some that have debts in dollars that did less well than others. In all cases we have a stock exchange that is hedging the risks of a devaluation”.
On the other hand, the rebound of raw materials, such as oil and iron ore, was also among the causes of the good performance of the region’s stock exchanges.
Brazil’s Ibovespa (IBOV) benefited from this, the index boosted by Vale (VALE3) and Petrobras (PETR3; PETR4) share hikes.
📉 A Bad Day:
Mexico’s stock market diverged from its Latin American peers and was the only one among the region’s main markets to close with losses.
The performances of the communication services, industrials and finance sectors were among the biggest losers of the day.
Specifically, shares of Controladora Vuela Cia (VOLARA), América Móvil (AMXL) and Femsa (FEMSAUBD) suffered the sharpest losses.
Femsa shares have been falling since Tuesday, even touching their lowest level since 2020, after the company announced the purchase of Swiss company Valora for $120 million.
“The 52% premium for a company that is not initially additive in valuation was probably excessive for the market,” Marco Montañez, an analyst at Vector Casa de Bolsa, told Bloomberg Línea.
🗽 On Wall Street:
Thursday’s was the best Wall Street session in two weeks, and which swept along everything from speculative investments to technology titans. US equity contracts dipped in early Asian trading Friday.
The S&P 500 climbed 1.50% on its fourth consecutive day of gains, while the Nasdaq Composite (CCMPDL) gained 2.28% and the Dow Jones 1.12%.
Two of the Federal Reserve’s most hawkish policy makers pushed back against fears of a recession as monetary settings tighten. Governor Christopher Waller and St. Louis Fed President James Bullard backed the need for restrictive policy to curb price pressures but argued the US can still avert a contraction.
The possibility of 1.5 trillion yuan ($220 billion) of infrastructure stimulus in China to shore up growth also injected a dash of optimism, lifting commodities including metals and oil, which is back above $100 a barrel.
A dollar gauge and Treasuries fell, leaving the US 10-year yield at about 3%. Bitcoin scaled $21,000 for the first time this month.
As ever in a year of marked volatility and steep losses, the question is whether the tilt in market narrative away from recession fears toward the fabled soft landing is anything more than temporary.
“I’m calling this period right now a recession obsession,” Brian Belski, chief investment strategist at BMO Capital Markets Corp., said on Bloomberg Television. “Institutional investors are not positioned for any kind of upside move. That’s why you are seeing these sharp moves on a day like today and certainly over the last few days in terms of a short squeeze. We remain positive and think people are way too negative.”
Portions of the US yield curve remain inverted, which for some is a sign that the threat of recession is elevated. High bond volatility also points to great uncertainty. All eyes will be on the US jobs report on Friday for further clues about the Fed’s policy path.
Elsewhere, the pound rose after Boris Johnson announced his intention to resign as British prime minister, easing the political chaos in the UK.
🔑 The Day’s Key Events:
Oil prices rebounded and returned above $100 per barrel after fresh signs of how tight the market may be.
Russia ordered a halt to a key export terminal that was expected to load 1.24 million barrels per day in July, according to a plan seen by Bloomberg.
“While supply is constrained by structural underinvestment, demand remains resilient in the face of recession concerns,” analysts at JPMorgan Chase (JPM) said in a note to clients reviewed by Bloomberg.
🍝 For the Dinner Table Debate:
British Prime Minister Boris Johnson finally announced his resignation from office on Thursday, after a wave of resignations among his ministers and following criticism from several Conservative Party MPs.
“It is clear that it is now the will of the Conservative Party in Parliament that there should be a new leader of that party and therefore a new prime minister,” Johnson said in a brief statement outside 10 Downing Street.
Johnson leaves after a series of scandals and amid political and economic uncertainty, with high inflation and the threat of recession.
The deck of names to succeed him is already rattling. Foreign Secretary Liz Truss, Trade Minister Penny Mordaunt, Defense Secretary Ben Wallace and newly appointed Chancellor of the Exchequer Nadhim Zahawi and Attorney General Suella Braverman are among the candidates, in addition to relative outsider Tom Tugendhat, who is a backbencher.
-- Carlos Rodríguez Salcedo, a content producer for Bloomberg Línea, and Sunil Jagtiani of Bloomberg News, contributed to this report