Brazil’s Ibovespa Falls Amid Lula’s Lack of Fiscal Plans; NYSE Closes Week With Gains

Only Argentina’s MERVAL index closed with gains in Latin America on Friday, while the NYSE closed lower but rounded out the week with gains

Stock activity on an electronic board at the Brasil Bolsa Balcao (B3) stock exchange in Sao Paulo, Brazil. Photographer: Patricia Monteiro/Bloomberg
November 25, 2022 | 07:44 PM

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A roundup of Friday’s stock market results from across the Americas

👑 Argentina leads in Latin America:

Argentina’s MERVAL (MERVAL) was the only index to register gains in Latin America on Friday, advancing another 1.73% after the moderate movement of Wall Street.

At the close of the day, the Merval had accumulated gains of 12.50% so far in November and is now above 163,000 points. The outstanding shares of the day were those of BBVA (BBAR), which gained 6.11%, and YPS S.A. (YPFD), which rose 4.35%.

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On Friday, Argentina’s Economy Minister Sergio Massa, announced measures to reduce the tax burden on vehicle and auto parts producers, in order to encourage a growth in exports in the automotive sector during 2023.

📉 A bad day for the Ibovespa:

Meanwhile, the other Latin American stock exchanges registered losses, led by Brazil’s Ibovespa (IBOV), which trimmed Thursday’s gains and fell 2.55%.

Companies in the non-basic consumer products and information technology sectors were the worst performers on Friday in Brazil. Qualicorp Cons e Corr (QUAL3) shares fell 8.39% and CVC Brasil Operadora e Agencia (CVCB3) lost 6.85% on the day.

Once again, the political scenario hit the Brazilian market, after Fernando Haddad, one of the names that most sound to occupy the Treasury portfolio in Lula da Silva’s government, did not give clear signals about the spending ceiling to be contemplated in the fiscal policy, in the middle of a lunch with bankers at the Brazilian Federation of Banks.

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On the other hand, Mexico’s S&P/BMV IPC (MEXBOL) fell 0.60% and Chile’s Ipsa (IPSA) lost 0.46%.

Rosanna Costa, president of the Central Bank of Chile, said Friday it is still too early to speak of a change in inflation trends, despite the fact that in October inflation was below estimates, but insisting that conclusions cannot be drawn based on a single report. Costa said that the key rate will remain at its current level for as long as it takes for inflation to return to the 3% target.

Lastly, and with slight losses, Colombia’s Colcap (COLCAP) appeared, down 0.13% and Peru’s S&P/BVL (SPBLPGPT) was down 0.11%.

🗽 On Wall Street:

US stocks ended Friday little changed as investors assessed prospects for less-aggressive central bank tightening and weighed China’s latest move to stimulate its economy.

The S&P 500 wavered for most of Friday’s shortened trading session. But its weekly gain of 1.5% took the index to the highest level since early September. The Nasdaq 100 also eked out a gain for the week, despite dropping on Friday. Most Treasuries erased early losses.

The S&P 500 closed 0.03% lower, the Nasdaq Composite (CCMPDL) slipped 0.52% and the Dow Jones Industrial Average edged up 0.45% in Friday’s trading.

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“It’s a slow day with US market holiday,” said Marija Veitmane, senior multi-asset strategist at State Street Global Markets. “We’re seeing a bit of profit taking and position adjustment post a strong risk rally last week.”

Sentiment was boosted this week after the Federal Reserve’s Nov. 1-2 meeting minutes showed most officials backing slowing the pace of interest-rate hikes. Since the Fed’s latest meeting, investors have parsed a bevy of economic data that somewhat eased inflation concerns, further strengthening the case for smaller rate hikes.

All eyes will be on the jobs report next week and on Fed Chair Jerome Powell and New York Fed President John Williams, who are among central bank officials scheduled to speak. Both officials will make clear that a tight labor market and elevated services inflation will keep the Fed hiking for longer, strategists with TD Securities wrote in a note.

“As markets welcome the prospect of smaller hikes, we expect them to counter that by emphasizing the need to reach an appropriately higher terminal rate,” they said.

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Trading on Monday will also hinge on Black Friday sales and further information on the virus outbreak in China, said Julian Emanuel, Evercore ISI’s chief equity and quantitative strategist.

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China’s central bank on Friday cut the amount of cash lenders must hold in reserve for the second time this year, an escalation of support for an economy racked by surging Covid cases and a continued property downturn. US-listed Chinese stocks fell and posted their first weekly decline this month.

“How effective that will prove to be when cities are seeing restrictions and effective lockdowns reimposed is hard to say,” said Craig Erlam, senior market analyst at Oanda. “But combined with other measures to boost the property market and ease Covid curbs, the cut could be supportive over the medium term when growth remains highly uncertain.”

European Union diplomats, meanwhile, won’t meet on Friday or over the weekend to discuss the oil-price cap as divisions within the bloc remain entrenched, according to people familiar with the matter. Oil suffered a third weekly loss.

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On the currency markets, the Bloomberg Dollar Spot Index rose 0.1%, the euro was little changed at $1.0404, the British pound fell 0.2% to $1.2093, and the Japanese yen fell 0.4% to 139.13 per dollar.

🔑 The day’s key events:

Oil is still affected and registered a third weekly loss, on account of the discussions raised by the European Union on a price cap on Russian crude oil, which were postponed until Monday, as Poland and the Baltic countries opposed a proposal that they consider generous to Moscow.

WTI crude oil fell 2.13% to $76.28 per barrel and Brent crude oil fell 2.0%, with a price per barrel of $83.63.

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In view of the discussions being held by the EU, it was revealed that the Kremlin is preparing a presidential decree that will prohibit Russian companies and traders who buy oil from the country from selling it to anyone who participates in a price cap mechanism, according to a person with knowledge of the matter.

In addition, crude oil prices are also being weighed down by the prospect of weaker global demand for oil. The latest factor evidencing this is a closely watched gauge of Asian crude consumption that fell to a seven-month low, as rising Covid cases in China triggered sharp curbs in the world’s largest importer.

🍝 For the dinner table debate:

The establishment of a $1 billion recovery fund for the crypto industry pushed by Binance CEO Changpeng “CZ” Zhao has failed to quell fears of contagion in the sector following the collapse of FTX.

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In an interview with Bloomberg Television, Zhao gave new details about the deals Binance is exploring in the wake of its rival exchange’s bankruptcy. At the center of them is the fund, which is looking to back crypto projects that show promise but have liquidity issues.

But in a subsequent blog post it explained that the commitment could increase to US$2 billion if necessary. Jump Crypto, Polygon Ventures, Aptos Labs, Animoca Brands, GSR, Kronos and Brooker Group are making a combined initial pledge of US$50 million.

However, the industry remains concerned about the implications of FTX’s demise. “There is too much uncertainty in the market for the recovery fund itself to be the catalyst that turns everything around. We don’t yet know the extent of the contagion. But I think we’re at or near the bottom and I don’t expect the markets to go much lower from here,” said Hayden Hughes, CEO of social trading platform Alpha Impact.

Sebastián Osorio Idárraga, a content producer at Bloomberg Línea, and John Viljoen of Bloomberg News, contributed to this report.