Brazil’s Ibovespa Falls as Bolsonaro’s Party Queries Election; S&P 500 Hits 2-Month High

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

📉 A bad day for Brazil’s Ibovespa:

Brazil’s Ibovespa (IBOV) closed lower on Tuesday after the Liberal Party (PL) of Brazil’s president, Jair Bolsonaro, filed legal action before the Superior Electoral Court in a bid to annul votes from some electronic ballot boxes, alleging that there are “inconsistent registration numbers”, an alleged sign of malfunction.

Consequently, the Brazilian stock market fell 0.65%, erasing Monday’s gains. Petrobras shares (PETR3; PETR4) were the hardest hit, with losses of 10.63% and 12.88%, respectively.

The number of votes cast at the polls alleged by Bolsonaro’s political party was 60% of the total, according to information from the Folha de S. Paulo newspaper, enough to change the result of the elections that handed victory to Luiz Inácio Lula da Silva on October 30.

Meanwhile, Chile’s Ipsa (IPSA) dropped 0.34% on Tuesday, with shares in the non-basic consumption and energy sectors recording the sharpest losses.

👑 Colombia leads in Latin America:

Colombia’s Colcap (COLCAP) registered the best performance in Latin America on Tuesday, gaining 1.97% and trimming part of Monday’s losses.

This Tuesday in Medellin, at an extraordinary shareholders’ meeting of Grupo Sura (GRUPOSUR), the board of directors was reconfigured, with the surprise the return of Gabriel Gilinski Kardonski.

In addition, the Dian reported that in October the tax collection was 14.97 trillion Colombian pesos ($3.05 billion), 3.4 trillion pesos more than in 2021, when it was 11.57 trillion pesos.

Behind the Colombian market came Peru’s S&P/BVL (SPBLPGPT), gaining 1.89%, driven by stocks in the utilities and finance sectors.

In the region, there were also gains in Argentina’s Merval (MERVAL), which rose 0.58% after the holiday, and Mexico’s S&P/BMV IPC (MEXBOL), with a gain of 0.37%.

🗽 On Wall Street:

After starting the week with losses, US stocks recovered ground on Tuesday as investors adjusted their expectations of the Federal Reserve’s next moves, following speeches indicating that rates will continue to rise but that the pace of rate hikes may slow.

On Tuesday, the Richmond Fed’s manufacturing survey came in slightly below expectations, with data confirming the peak inflation narrative.

The S&P 500 closed at its highest level since September 12 and the Nasdaq rose more than 1%. At the close of trading, the Dow Jones Industrials gained 1.18% and the Nasdaq Composite (CCMPDL) gained 1.36%. Meanwhile, the S&P 500 gained 1.36%, boosted by retail stocks.

Best Buy Co (BBY) was the top-performing stock in the S&P 500 on Tuesday, gaining 13% after upgrading its annual outlook for earnings and comparable sales. In turn, other retailers such as Abercrombie and Fitch Co (ANF), American Eagle Outfitters Inc. and Burlington Stores Inc. rose at least 18% each on better-than-expected quarterly reports, with Burlington’s 21% jump marking its biggest advance in more than nine years.

However, Craig Johnson, chief market technician at Piper Sandler, said in a note that historically the week of Thanksgiving in the U.S. also tends to have a “bullish tone” for stocks. According to Johnson, the week starts with a dip on Monday and then has an improvement versus the Thursday holiday about 68% of the time, since 1950.

Treasuries rallied, with the benchmark 10-year yield around 3.76%. Oil rose amid an uncertain supply outlook alongside a proposal by the European Union to soften Russian crude sanctions. The dollar snapped a three-day climb.

In recent days, Fed officials have broadly maintained their steadfast stance to fight inflation. Yet San Francisco Fed President Mary Daly also said that officials need to be mindful of the lags in the transmission of policy changes, while her Cleveland counterpart Loretta Mester said she’s open to moderating the size of rate hikes. On Tuesday, the Richmond Fed Manufacturing Survey came in slightly below expectations, with data confirming the peak inflation narrative.

“We think the Fed leadership wants to get off the 75-basis-point-a-meeting hamster wheel even though it is finding it hard to do so while maintaining control of financial conditions,” Evercore ISI’s Krishna Guha wrote in a note. “We think the Fed is still heading for a ‘hawkish slowing.’ And, for us at least, the slowing part is what matters.”

Despite hints of moderation, the Fed is likely to raise its estimate of the terminal rate as early as December, in part because inflation may prove sticky, said Sonia Meskin, head of US macro at BNY Mellon Investment Management.

“I don’t know if I would read too much into the sort of daily repricing from the macro perspective at this stage, but I would be interested to see the labor market data for November and then any indication of whether this information weakening is sustained or not,” Meskin said by phone. “I think those would really be more indicative of the future of the policy trajectory.”

Thanksgiving week in the US also tends to carry a “historically bullish tone” for stocks, Craig Johnson, chief market technician at Piper Sandler, said in a note. The week has started with a dip on Monday and then improves around the Thursday holiday about 68% of the time since 1950, he said.

Despite Tuesday’s rally, China’s Covid control restrictions are still weighing on investors. Shutdowns can have a negative impact on supply-chain dynamics and possibly exacerbate inflation issues across economies. These restrictions now impact a fifth of China’s economy. Chinese stocks listed in the US fell on Tuesday for a third straight session.

Meanwhile, the OECD said the world’s central banks must continue to raise rates to fight inflation, even as the global economy sinks into a significant slowdown. The unexpected surge in prices and its impact on real incomes is hurting people everywhere, creating problems that will only worsen if policy makers fail to act, the Paris-based organization said.

On the currency markets, the Bloomberg Dollar Spot Index fell 0.5%, the euro rose 0.6% to $1.0300, the British pound rose 0.6% to $1.1889 and the Japanese yen rose 0.6% to 141.24 per dollar.

🔑 The day’s key events:

Oil recovered this Tuesday after Saudi Arabia denied the report that sought an increase in crude oil supply by OPEC+; both references increased their price by more than 1%.

WTI crude oil climbed to $80.95, an increase of 1.14%, while Brent hit $88.43, up 1.12%.

Alongside this, the European Union proposed easing sanctions on Russian crude, seeking to add a 45-day transition to the introduction of the price cap on Russian exports.

“Crude is still in the process of reversing yesterday’s rumored OPEC production increases (...) While Covid’s problems in China are a concern, the price break in the last two trading sessions was definitely overdone,” said Dennis Kissler, senior vice president at Bok Financial Securities was quoted by Bloomberg as saying.

Meanwhile, Norway announced the development of a new gas field in the Norwegian Sea starting in 2026. The initiative represents an attempt to maintain natural gas flows to Europe, which is rushing to replace Russian supply, seeking to strengthen the European bloc’s energy security.

🍝 For the dinner table debate:

Global central banks must keep raising interest rates to fight rising and widespread inflation even as the world economy sinks into a significant slowdown, the Organization for Economic Cooperation and Development (OECD) said Tuesday.

The unexpected rise in prices and its impact on real incomes is hurting people everywhere, creating problems that only tend to get worse if monetary policymakers fail to act, the Paris-based organization said.

The OECD raised inflation forecasts for 2023 compared with its September projections and predicted that price increases the following year will remain well above many central banks’ targets: at 2.6% in the United States, 3.4% in the Eurozone and 3.3% in the United Kingdom.

The prescription comes at a difficult juncture for the global economy, which is already slowing under the weight of rising energy costs as Russia keeps up its war in Ukraine. Another risk of rising interest rates is that credit will become more expensive, especially for low-income countries. According to the OECD, two-thirds of them are already heavily indebted.

Sebastián Osorio Idárraga, a content producer at Bloomberg Línea, and Isabelle Lee and Peyton Forte of Bloomberg News, contributed to this report.