Brazil’s Ibovespa Suffers Sharpest Daily Drop Since 2021; NYSE Closes Higher

Brazil’s index sank 3.27%, its sharpest drop since September 2021, while Mexico’s stock market led the gains in Latin America and the NYSE also began the week with gains

Brazil’s Ibovespa suffers sharpest daily drop since September 2021
By Bloomberg Línea and Bloomberg News
October 24, 2022 | 08:20 PM

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

👑 Mexico leads in Latin America:

Latin American stock markets closed mixed on Monday, with Mexico’s S&P/BMV IPC (MEXBOL) and Argentina’s Merval (MERVAL) leading the day’s gains.

The Mexican stock market closed with a gain of 1.37%, driven by the communication services, industrials and finance sectors. The shares of Industrias Peñoles (PENOLES) and Volaris (VOLARA) were among the best performers today. Grupo Aeroportuario Centro Norte (OMAB) also stood out, rising 5.7%, the sharpest rise since April 5.

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In Mexico, the quarterly reporting season is about to begin. Companies listed on the Mexican stock market must submit their third quarter financial information by October 28.

The information on financial and operating performance from July to September is the last to be published before the end of 2022 and is the opportunity for analysts and investors to learn about companies’ expectations for the end of the year.

📉 A bad day for the Ibovespa:

Brazil’s Ibovespa (IBOV) and Colombia’s Colcap (COLCAP) saw the sharpest declines on Monday, the later down 3.27% at closing, while the Colombian index slipped 2,92%.

The Brazilian stock market was weighed down by the performance of the energy, finance and health sectors. The ibovespa’s drop was the sharpest daily drop since September 2021, pressured by a down day for commodities and the performance of shares such as those of Banco do Brasil SA (BBAS3) and Petrobras (PETR4), which were the biggest losers during the session.

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One week before the second round of the presidential elections and in the midst of low oil prices, Petrobras shares closed with a 9.89% drop. Last Friday, the company’s preferred shares had the largest daily increase since 2009, which led the oil company to surpass $100 billion in market value. The session was also bearish for Banco do Brasil shares, which plunged 10.03%.

On the other hand, the Colombian index was dragged down by the performance of the communication services, materials, utilities and finance sectors. Shares of Bancolombia (BCOLO), Banco de Bogotá (BOGOTA) and Corporación Financiera Colombiana (PFCORCOL) were among the worst performers.

🗽 On Wall Street:

US stocks rallied for a second straight session as investors geared up for some of the world’s biggest companies to report earnings this week. Traders also mulled whether the Federal Reserve will slow its pace of interest-rate hikes after assessing weak economic data that released Monday.

More than 80% of stocks in the S&P 500 index closed in green on Monday, buoyed by gains in technology and health-care companies. The Nasdaq 100 also rose more than 1%. US-listed Chinese shares plunged after that nation’s equity index tumbled as President Xi Jinping solidified his power. Among the megacap companies slated to report earnings this week are Alphabet Inc., Microsoft Corp. and Meta Platforms Inc.

The S&P 500 climbed 1.19%, boosted by the tech and health sectors, while the Nasdaq Composite (CCMPDL) advanced 0.86% and the Dow Jones Industrial Average advanced 1.34%.

US Treasury 10-year yields ended the session around 4.25%. UK bonds posted some of their biggest gains on record as investors expect incoming Prime Minister Rishi Sunak to repair the damage caused by predecessor Liz Truss after her massive package of unfunded tax cuts roiled financial markets.

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Earnings remain in focus in the US, with investors still on edge over whether companies that are among the key profit-growth engines for the S&P 500 can deliver profits with inflation crimping margins. Of the almost 20% of companies that have reported so far, roughly 58% posted positive surprises in both revenue and earnings per share, according to data compiled by Bloomberg. As the Fed attempts to stomp out inflation, latest earnings displaying resilience and showing few signs of recession may be making some investors uneasy on equities.

“Over the short-term, we think we can get some relief. The fact that earnings season has also been relatively strong is also helpful,” Andrew Sheets, Morgan Stanley’s chief cross-asset strategist, said on Bloomberg Television. “But the big picture -- and I don’t think this changes -- is that we still view this as a bear market rally rather than the start of a larger new bull market.”

Fed policy is also still a key focus for investors. Data on Monday indicated that Fed tightening is starting to hit the economy, with Purchasing Managers’ Index indicators showing contraction in the services and manufacturing sectors. Reports that the Fed may soon start reducing the size of its rate hikes had pushed stocks higher by more than 2% on Friday. San Francisco Fed President Mary Daly’s comments on Friday also added to the tentative optimism. But some investors are still cautious in their expectations that the central bank is moderating its rhetoric.

“We are still agnostic as to whether the Fed really is going to pivot or be at the peak of its hawkish cycle,” said Lisa Erickson, senior vice president and head of public markets group at US Bank Wealth Management. “If you look at the underlying data, inflation remains sticky, particularly in services ex-housing, which can often be more persistent. So given the Fed’s dependence on the data, we’re not clear exactly again, when the Fed may truly begin to slow down.”

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The central bank needs to maintain a balance between addressing inflation and reacting appropriately to any signs of slowdown in inflation, Erickson said.

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Alphabet Inc. (GOOG), Microsoft Corp (MSFT) and Meta Platforms Inc. (META) are due to announce their quarterly results this week.

On the currency markets, The Bloomberg Dollar Spot Index rose 0.4%, the euro rose 0.1% to $0.9873, the British pound fell 0.2% to $1.1279 and the Japanese yen fell 0.9% to 148.98 per dollar.

🔑 The day’s key events:

Oil started the week oscillating, with West Texas Intermediate for December delivery down 0.55% to $84.58 a barrel, while benchmark Brent ended the day’s trading at $93.55 a barrel for December delivery, representing a slight rise of 0.05%.

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In this area, the main concern is that the weak Chinese demand will affect the world outlook, as well as the effects of an economic recession on demand. On Monday, U.S. Treasury Secretary Janet Yellen warned investors in a speech in New York that global market tensions could disrupt the financial system.

“Oil prices continue to struggle to maintain their levels as economic turmoil around the world is turning the market from being undersupplied to a potential economic collapse,” said Phil Flynn, market analyst at Price Futures Group.

Crude has lost a third of its value since June. Production cuts by the Organization of the Petroleum Exporting Countries and European Union sanctions on Russian oil flows have affected the oil market.

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🍝 For the dinner table debate:

Former British Chancellor of the Exchequer Rishi Sunak will be the new prime minister of the United Kingdom after his only possible rival, Penny Mordaunt withdrew from the contest to succeed Liz Truss on Monday

“We all owe it to the country, to each other and to Rishi to unite and work together for the good of the nation,” Mordaunt said Monday in a letter announcing her decision.

It is a shocking turnaround for Sunak’s political fortunes, after resigning from Boris Johnson’s government in July and then losing the race to be prime minister to Liz Truss.

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However, the fact that his repeated warnings that Truss’s economic plan would catalyze a scenario of economic chaos came true put him at the head of the race to succeed her after her resignation after just six weeks.

Leidys Becerra, a content producer at Bloomberg Línea, and Peyton Forte, Vildana Hajric and Isabelle Lee of Bloomberg News, contributed to this report.