Bimbo, Walmex Shares Boost Mexico’s Stock Market; S&P 500 Pulls Out of Free Fall

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

👑 Mexico leads in Latin America:

Mexico’s and Brazil’s stock exchanges were able to disconnect from the risk aversion generated by expectations of a global recession materializing, and which have dampened investor enthusiasm in recent days, and led the gains among Latin America’s stock markets on Thursday.

The S&P/BMV IPC (MEXBOL) rose driven by the performance of the consumer staples and financial sectors. Increases were especially felt in Walmex (WALMEX*), whose shares had the largest daily rise since 2021.

The increase is explained by investors seeking defensive positions and the retailer’s sales are consumer staples that are traditionally resistant to downturns, Alan Alanis, director of Mexico equity strategy and head of the food and beverage sector at Banco Santander Mexico (BSMXB), was quoted by Bloomberg as saying.

Bimbo (BIMBOA) shares also climbed following the drop in wheat prices. “Bimbo’s share price tends to move in the opposite direction to wheat prices which have been falling to almost flat so far this year,” Alanis added.

Brazil’s Ibovespa (IBOV) advanced thanks to the performance of the health, real estate and finance sectors.

Local investors evaluated GDP data for the second quarter, which showed a growth in activity of 1.2% in the period, higher than economists’ expectations. During the year, GDP accumulated an advance of 2.5%.

📉 Copper-price falls sinks Peru’s markets

Peru’s stock market closed with the biggest drop of the day among Latin America’s main markets after the S&P/BVL Peru registered a fall of more than 2%.

The materials, financials and industrials sectors had the largest declines on the day. Shares of Unacem (UNACEMC1), Cerro Verde (CVERDEC1) and Southern Copper Corp (SCCO) closed with the session’s biggest losses.

Risk aversion and the fall of commodities, especially copper, hit the Peruvian stock market.

Copper fell 0.79% on the London Metal Exchange as the outlook for raw materials worsens with the possibility of lower economic growth, the energy crisis in Europe and the lockdowns in China due to an outbreak of Covid-19 cases.

🗽 On Wall Street:

A surprising late-day reversal took US stocks higher as investors await Friday’s jobs report to gauge how hawkish the Federal Reserve will be. Recent data pointed to a resilient US economy, buoying sentiment later in the day.

The S&P 500 ended its losing streak on Thursday, after falling for most of the session. The Nasdaq 100 finished the day flat. Treasuries slumped amid a selloff that left the two-year yield at the highest in almost 15 years. The dollar surged to a record high on speculation that latest data will force the central bank to raise rates by three-quarters of a percentage point at its meeting later this month.

The S&P 500 climbed 0.30% and the Dow Jones Industrial Average 0.46%, but the Nasdaq Composite (CCMPDL) slipped 0,26%.

Several Fed officials in recent days reiterated their promise to remain aggressive to control inflation, quashing any hopes of a dovish pivot investors had come to expect after July’s inflation reading. A fresh batch of labor-market and manufacturing data this week also pointed to a resilient US economy, strengthening the central bank’s resolve. But some investors positioned themselves to take advantage of recent market dislocations, bolstered by the positive data.

“We’re taking a more opportunistic tone when it comes to markets,” Ashish Shah at Goldman Sachs Asset Management said on Bloomberg TV. “There’s going to be a lot of back and forth through the data and you want to set yourself up to be investing because sitting in cash is really expensive right now.”

Still, stocks are entering a month that is often poor for returns, following losses in August. The S&P 500 has averaged declines of 0.6% and 0.7% for August and September, respectively, over the past 25 years.

“Right now you have to be patient,” said Megan Horneman, chief investment officer at Verdence Capital Advisors. “I wouldn’t try and get in the middle of this kind of reset and re-pricing we’ve seen. The markets can move pretty violently.”

Risk assets had been under pressure after China put the megacity of Chengdu under lockdown, delivering a blow to economic growth. Chengdu’s lockdown continues to ripple through the economy. Factory slowdowns in Europe and Asia also reflect dwindling demand.

Investors are also assessing political risks as Russia’s invasion of Ukraine continues and tensions in Taiwan mount, with the latter shooting down a civilian drone after weeks of complaints about incursions by unmanned aerial vehicles from China.

Russia is considering a plan to buy as much as $70 billion in yuan and other “friendly” currencies this year to slow the ruble’s surge, before shifting to a longer-term strategy of selling its holdings of the Chinese currency to fund investment.

“The Fed effect is now melding with other global factors such as China’s growth slowdown and Europe’s stagflation to create a more fraught global macro environment with higher rates and lower growth,” said Alvin Tan, strategist at RBC Capital Markets in Singapore. “It is this combination of hawkish central banks led by the Fed, China’s slowdown and Europe’s stagflation that is now driving volatility across global markets.”

On the currency markets. the Bloomberg Dollar Spot Index rose 0.7%, the euro fell 1.1% to $0.9945, the British pound fell 0.7% to $1.1541, and the Japanese yen fell 0.9% to 140.20 per dollar.

🔑 The day’s key events:

The possibility of slower economic growth affecting crude oil demand once again hit oil prices, which hit a two-week low.

As investors continue to focus on the possibility of interest rate hikes slowing economies, signals from China are adding more pessimism to market sentiment.

The Asian giant, the top oil importer, continues to battle Covid-19 and announced lockdowns in the southwestern city of Chengdu, affecting around 21 million people.

“China is the key question mark for the outlook for crude demand and it appears that reopening momentum will remain elusive. The closure of Chengdu, a vital transportation hub, will cause another massive impact to the economy,” said Edward Moya, analyst at Oanda.

🍝 For the dinner table debate:

The dollar continues to gain strength and the Bloomberg Dollar Spot Index, which tracks the currency against a basket of developed and emerging market peers, rose as much as 0.9% during the session.

The greenback’s strength has come on the back of safe-haven buying, the prospect of higher interest rates and global growth concerns as the outlook in China and Europe deteriorates.

The currency’s rise followed data released today that showed the US economy remains strong.

“Unsurprisingly, the dollar has hit a new all-time high, both on safe-haven flows from global economic weakness and the resilience of the US economy, which paves the way for the Federal Reserve to remain aggressive. The king dollar has woken up from a nap and that could mean a lot more pain for European currencies,” added Oanda’s Moya.

-- Carlos Rodríguez Salcedo, a content producer at Bloomberg Línea, and Emily Graffeo and Isabelle Lee of Bloomberg News, contributed to this report.