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Brazil’s Ibovespa Climbs As Petrobras Cuts Diesel Prices; US Markets Close Mixed

Petrobras shares rose despite oil prices falling, as the Brazilian energy giant cut diesel prices for the first time in more than a year

A worker refuel a vehicles at a Petrobras gas station in Rio de Janeiro, Brazil.
By Bloomberg Línea and Bloomberg News
August 04, 2022 | 07:35 pm

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

👑 Brazil, Latin America’s Leader:

The Brazilian stock market led the gains in Latin America on Thursday, the Ibovespa (IBOV) index climbing 2.04% after Petrobras (PETR3, PETR4) shares rose, despite the drop in oil prices, as the company cut diesel prices for the first time in more than a year and said the reduction follows the evolution of reference prices.

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Gol Linhas Aereas (GOLL4), Magazine Luiza (MGLU3) and Meliuz (CASH3) shares were also among the day’s biggest climbers.

Investors were also weighing up the central bank’s interest rate hike to 13.75%, as well as its signal of a further, smaller increase at its September meeting.

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📉 A Bad Day for Chile’s IPSA:

The Chilean stock market saw its consecutive day with the worst performance among its Latin American peers as the industrial, communication services and consumer discretionary sectors affected the market’s performance.

The shares of Compañía de Cervecerías Unidas (CCU), Quinenco (QUINENC) and Aguas Andinas (AGUAS/A) were a drag on the Ipsa (IPSA) index.

The brewer reported a quarterly loss driven by higher input costs after the market closed yesterday.

CCU also said it expects the challenging macroeconomic scenario to continue and that it is focused on controlling costs and increasing prices in its main product categories, Bloomberg reported.

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Barbara Angerstein, an analyst at Itaú, said the company will have to raise prices to return to profit in the second half of 2022.

🗽 On Wall Street:

US stock markets closed mixed on Thursday as investors await the July employment report to be released Friday, and which is expected to announce that the unemployment rate and non-farm payrolls increased, adding 250,000 new jobs.

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Federal Reserve Chairman Jerome Powell warned in his most recent press conference that an unusually high interest rate hike will depend solely on the data.

Although after the central bank’s July meeting, the market interpreted that the Fed would be ready to make a policy shift, recent speeches by Fed officials suggest that there is still some way to go.

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Four Fed district bank presidents emphasized in their remarks this week that there are still no signs of easing inflation, Bloomberg reported. For example, San Francisco Fed President Mary Daly said there is still a long way to go to control the high cost of living.

On the news, the S&P 500 fell slightly by 0.08%, while the Dow Jones Industrials lost 0.26%. Meanwhile, the Nasdaq Composite (CCMDPL) advanced 0.41%.

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Treasuries mostly made modest gains, leaving the 10-year yield at 2.69%. The inversion between two-year and 10-year yields remained around the deepest since 2000, indicating worries about a recession. The dollar was little changed.

Cleveland Federal Reserve Bank President Loretta Mester reiterated the US central bank’s determination to quell price pressures. Earlier Thursday, the Bank of England unleashed its biggest interest-rate hike in 27 years and warned of a prolonged economic contraction.

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Tighter policy is fanning economic angst and sapping assets like oil, which extended a plunge below $90 to levels last seen before Russia’s war in Ukraine. Gold, meanwhile, advanced in part on US-China tension over Taiwan.

A global equity index is set for a third weekly advance in a recovery from bear-market lows, helped by corporate earnings. The durability of the bounce remains in doubt because of central bank rate rises and geopolitical threats.

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“It’s a little too early to say the risk is off the table,” Carol Schleif, deputy chief investment officer at BMO Family Office, said on Bloomberg Television. “Significant slowing” is starting to come in parts of the US economy, she said.

US payrolls Friday are the next key data point for markets. Hiring likely softened in July but the labor market remains consistent with an expanding rather than recessionary economy and the Fed will press on with rate hikes, according to Anna Wong, chief U.S. economist for Bloomberg Economics.

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Investors are also continuing to monitor the aftermath of US House Speaker Nancy Pelosi’s visit to Taiwan. China, which regards the self-ruled island as part of its territory, reportedly fired missiles over Taiwan during military drills on Thursday. If confirmed, that would mark a major escalation.

🔑 The Day’s Key Events:

Benchmark WTI prices fell below $90 per barrel for the first time since the start of the war in Ukraine on Thursday as investors continue to weigh falling US gasoline demand and the possibility of a recession.

Data from the Energy Information Administration on Wednesday showed that the four-week average of gasoline consumption is even below the summer of 2020 when mobility was reduced by Covid-19.

“Recession talk is getting louder and, if realized, is likely to address some of the imbalance,” said Craig Erlam, an analyst at Oanda.

Adding to the scenario, in his view, is also a 4.5-million-barrel increase in US. crude stockpiles after forecasts projected a drop, and new talks to revive the Iran nuclear deal that could bring Iran back into the oil market.

🍝 For the Dinner Table Debate:

Oaktree Capital Management co-founder Howard Marks spoke to Bloomberg Line about the best way to approach investing in an age when social media and information offerings can saturate the public.

According to Marks, investors shouldn’t let social media and crowds drive them crazy or follow hyped-up, massive investors looking for an easy win, get a prize and jump to something else.

“Sometimes, people are too optimistic, other times, too pessimistic. People should stop getting carried away and ask for guidance when massive investors get too excited and make something go too high. Maybe they should take some profits and get out, but certainly not pounce,” Marks told Bloomberg Linea on the sidelines of Brazilian brokerage firm XP’s summit in Sao Paulo.

Oaktree manages, according to its own data, $164 billion for its clients, mainly in debt securities. The firm operates mainly in the US, but also in Europe and China. According to Marks, it is not very active in Latin America.

Read the full interview here.

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