Brazil’s Ibovespa Falls Amid Rate-Hike Fears; US Stocks Snap 3-Day Rally

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

👑 Mexico leads in Latin America:

Mexico’s S&P/BMV IPC (MEXBOL) and the S&P/BVL of Peru (SPBLPGPT) saw the strongest gains on a mixed day for Latin America’s markets.

Mexico’s market closed 1.41% higher, driven by strong performance in the materials, real estate, and communication services sectors. Shares of Grupo México (GMEXICOB), GCC, the construction materials company (GCC), and Corporación Inmobiliaria Vesta (VESTA) were among the best performers.

The shares of Chedraui, the Mexican supermarket chain, also stood out during the day after rising more than 9% to historic highs during the day following the announcement of better-than-expected results for the third quarter of the year.

Specifically, Grupo Comercial Chedraui reported a 16.2% growth in its sales in stores with at least one year of operation in Mexico, exceeding the 10.7% reported by the country’s supermarkets and department stores association (Asociación Nacional de Tiendas de Autoservicio y Departamentales).

On the other hand, the Peruvian stock market had the second largest gain of the session, an increase of 1.30%. The index was supported by the performance of the industrials, materials and finance sectors; and shares such as those of Aenza SA (AENZAC1), Southern Copper (SCCO) and Sociedad Minera Cerro Verde (CVERDEC1).

📉 Another bad day for the Ibovespa:

Brazil’s Ibovespa (IBOV) fell again on Wednesday for the third consecutive day, closing 1.62% lower as it was dragged down by the performance of the consumer discretionary, information technology and finance sectors.

Anticipation of an interest rate decision by Brazil’s monetary policy committee (Copom), which was announced early evening and resulted in the rate remaining unchanged, made investors act with caution, coupled with expectations ahead of the second round of the presidential elections, and the unfavorable balance sheets of some Brazilian companies.

In the country’s reporting season, Santander (SANB1) was the first bank to publish its figures for the July-September period. In the quarter, the bank became less profitable, with rising non-performing loans weighing on its results. The bank’s local operation in Spain reported 23% lower earnings than the second quarter.

Locaweb (LWSA3), Magazine Luiza (MGLU3) and Positivo Tecnologia (POSI3) shares were among the biggest losers during the bearish day for the Ibovespa.

🗽 On Wall Street:

Wall Street saw a session of twists and turns on Wednesday, with stocks snapping a three-day rally as earnings from megacap firms highlighted the toll the Federal Reserve, and consequently the surging dollar, had on the economy.

Meta Platforms Inc. dropped 12% postmarket on a softer-than-expected revenue view and Ford Motor Co. also fell after it warned of a profit shortfall due to inflation. Snap Inc. and Pinterest Inc. also dipped in extended trading.

• Other earnings reports due this week include Apple, Exxon Mobil, Ford Motor, Credit Suisse, Airbus, Amazon, Bank of China, Boeing, Caterpillar, Cnooc, Intel, McDonald’s, Merck, Samsung Electronics, Shell, Vale, Volkswagen

The S&P 500 slipped 0.74%, the asdaq Composite (CCMPDL) slid 2.04% and the Dow Jones Industrial Average closed a fraction higher, shifting up 0.01%.

Treasuries gained, with the 10-year yield briefly dropping below 4% as investors mulled the Fed’s path after the Bank of Canada announced a smaller-than-expected rate hike.

Data that released this week showed a contraction in the services and manufacturing sectors and a drop in sales of new US homes, indicating that Fed tightening is starting to hit the economy. But investors still expect the central bank to raise rates by three-quarters of a percentage point during its next meeting before pondering the end of its tightening regime.

In any case, it’ll be challenging for the Fed to announce that they’re going to be less hawkish, as they have to manage investors’ expectations along the way, according to Dustin Thackeray, chief investment officer at Crewe Advisors.

“They obviously don’t want to be too dovish and the market is obviously looking for any sort of a sign from the Fed that we’re hitting the break, so to speak, on rate increases,” he said by phone. “If they continue on their too hawkish stance, there is a risk that things kind of get out of hand on that end as well. So they’re definitely walking a very fine line.”

On the currency markets, the Bloomberg Dollar Spot Index fell 0.9%, the euro rose 1.2% to $1.0081, the British pound rose 1.3% to $1.1626 and the Japanese yen rose 1.1% to 146.36 per dollar.

🔑 The day’s key events:

Oil prices rose again leveraged by record US exports last week, which reached 11.4 million barrels per day, the Energy Information Administration reported. The smaller-than-expected increase in crude inventories by 2.59 million barrels was ignored by the markets, which focused on the high export figure.

West Texas Intermediate crude rose almost 3%, the highest rise in a week, to settle above $88 per barrel. Benchmark Brent gained 2.56% to close at $96.08 a barrel.

“Rising exports and falling gasoline inventories are signs that we’re going to need more US oil in the future,” said Rob Thummel, portfolio manager at Tortoise Capital Advisors, which manages about $8 billion in energy-related assets.

Meanwhile, a gauge of the dollar fell for a second day to its lowest level in three weeks, making commodities priced in that currency more attractive. Oil prices have plunged since US benchmark WTI broke above $120, affected mainly by the strength of the dollar and recession fears.

🍝 For the dinner table debate:

As inflation continues to rise relentlessly globally, price increases are expected to impact real wages for the second year in a row in 2023. According to a survey by consultancy ECA International, only 37% of countries expect real wages to increase next year.

The hardest hit region will be Europe, where a fall of 1.5% is expected. UK wage earners saw the biggest hit this year since the survey began in 2000. Despite an average nominal increase of 3.5%, real wages fell 5.6% on inflation of 9.1%. The drop is expected to be 4% next year.

In the US, the fall will be 4.5%, but a reversal is expected next year with lower inflation and a 1% increase in real wages.

Asian countries account for eight of the ten countries where real wages are expected to rise the most: led by India at 4.6%, Vietnam at 4.0%, and China at 3.8%. Brazil’s 3.4% increase and Saudi Arabia’s 2.3% rise round out the top five.

Leidys Becerra, a content producers at Bloomberg Línea, and Isabelle Lee of Bloomberg News, contributed to this report.