A roundup of Monday’s stock market results from across the region
👑 Argentina’s Merval maintains upward trend:
Latin American stock markets closed mixed on the first trading day of 2023. Argentina’s Merval (MERVAL) continues its bullish streak and led the gains among its regional peers, closing with a 2.46% gain.
The performance of Transportadora Gas del Norte (TGNO4) shares, while Empresa Distribuidora y Comercializadora Norte (EDN) and YPF S.A (YPFD) shares boosted the performance of the index.
Two key investments are driving optimism in Argentina’s energy sector. The investments planned by the companies Oldelval (oil transportation) and Oiltanking Ebytem (oil storage) are two signs that have raised expectations in the energy sector regarding the future of the Vaca Muerta shale play and the production of unconventional oil and gas, in addition to the results of the bidding process of the Gas 4 and 5 Plan and the construction of the Néstor Kirchner gas pipeline.
Energy Minister Flavia Royón said in recent weeks that the sector can move in the medium term from a negative trade balance of $5.52 billion in 2022 “to a positive balance of between $4 billion and $8 billion in 2026″.
📉 A bad day for Brazil’s Ibovespa:
In a session of lower liquidity and in the face of fears about the domestic fiscal scenario under the new government of President Luiz Inácio Lula da Silva, Brazil’s Ibovespa (IBOV) index closed the first trading session of 2023 with a sharp fall of 3.06%.
Petrobras (PETR3;PETR4) shares fell 6.67% and 6.45%, respectively, after Lula extended the fuel tax exemption for 60 days and signaled a change in the state-owned company’s pricing policy.
“With a technically weak economic team, without a clear government plan and without the definition of the fiscal anchor, it seems that the market views the directions of the economy for the coming years with great disrepute,” Leandro Petrokas, director of Research and partner at Quantzed, wrote in a note.
The move comes a day after President Lula’s inauguration on Sunday in which he reinforced his commitment to fighting inequality and hunger, called current fiscal rules “stupidities” and said banks and public companies, including oil giant Petroleo Brasileiro SA, will have “a key role” in the new economy.
In his first hours back to work, Lula signed a temporary measure guaranteeing 600 reais ($112.17) a month for the Bolsa Familia aid program, removed companies such as Petrobras from privatization plans, revoked a decree reducing taxes on big business and extended a tax break on fuel.
🗽On Wall Street:
US and European equity futures declined and Asian shares fell in some markets early Tuesday in a sign that further pain lies ahead after global stocks tumbled by a fifth last year.
Contracts for the Euro Stoxx 50 slipped more than 1%, taking the shine off a 1.7% jump for the index on Monday. Contracts for the S&P 500 also dropped after initially rising early Tuesday. Shares in South Korea and Australia each tumbled more than 1%.
The pressure facing stocks followed the sharp swings last year that saw 20% in value wiped from global equities, the worst run since the financial crisis. Bonds lost 16% of value, the biggest decline since at least 1990 for one leading measure, as central banks hiked interest rates to slow inflation.
“We’re starting the year with tight financial conditions, a potential inflation pulse coming out of China and by extension that means we’ll probably have to go into the start of this calendar year relatively cautious across the whole portfolio,” Marc Franklin, senior portfolio manager for Manulife Investment Management, said in an interview with Bloomberg Television.
The yen strengthened as much as 0.8% against the dollar to trade at the highest level since June. The Japanese currency gained against all Group-of-10 currencies, in particular commodity ones including Australia, New Zealand and Canada. The advance follows sustained efforts by the Bank of Japan to depress yields on government debt, with the stronger yen indicating that traders believe the central bank will be forced to reduce its easy policy settings.
The New York Stock Exchange had remained closed Monday due to the New Year’s holiday.
🔑 The day’s key events:
The IMF’s managing director Kristalina Georgieva warned that the coming year will be “tough” for the global economy, saying it will be “tougher than the year we left behind.”
“We expect a third of the economy to be in recession,” Georgieva said in an interview. “Why? Because three big economies, the US, the EU and China, are slowing down at the same time.”
The IMF had already said in October that more than a third of the global economy will contract this year and that the chances of global GDP growing less than 2% (the criterion for defining a recession) in 2023 are less than 25%.
Looking at the three largest economies, Georgieva described a mixed picture in terms of their ability to withstand recession. While “the U.S. can avoid recession,” the European Union has been “badly affected by the war in Ukraine: half of the EU will be in recession next year,” she said. At the same time, China faces a “difficult year,” he said.
🍝For the dinner table debate:
After a challenging 2022 in economic terms for Latin America, with high inflation, high interest rates, Russia’s war in Ukraine and a strong US dollar, most countries in the region adjusted their minimum wages for this year.
On average, wages in the economies that have already made the adjustment advanced just over 8%, although each country has its own specific reality and the figures presented in this article are not intended as a comparison, since access to goods and services in each country is different.
These increases in minimum wages are also surrounded by challenges for the countries in the region, as the evolution of the economies and the labor market in LatAm will be highly conditioned by the performance of economic activity, the evolution of inflation and the limited space for the adoption of policies to stimulate aggregate demand, according to the Economic Commission for Latin America and the Caribbean (ECLAC).
Leidys Becerra, a content producer at Bloomberg Línea, and Richard Henderson and Jason Scott of Bloomberg News, contributed to this report.