A roundup of Monday’s stock market results from across the Americas
🌎 Latin American markets close mixed:
The stock markets of Latin America remain hot, with the main indexes closing a fairly positive month and marking a significant streak of gains. The best performers on Monday were the Lima Stock Exchange (SPBLPGPT), which rose 1.53%, followed by Brazil’s Ibovespa (IBOV) and the Bogota Stock Exchange (COLCAP), up 1.46% and 1.11% respectively.
But the star of the month was the IPSA index of the Santiago Stock Exchange (IPSA), which recorded its best month since May 2022 after posting a double-digit rise at the close of July.
The Chilean market rose by 10.50% during the month and has now posted four consecutive months of gains.
A key event to close the month was the cut of the Central Bank of Chile’s benchmark interest rate by 100 basis points, from 11.25% to 10.25%, the largest cut seen in the Chilean benchmark rate in a single session since the beginning of 2009. The decision was unanimous, and some entities are already anticipating another reduction of the same magnitude in the following session.
The markets were already anticipating that the central bank of Chile would be among the first in the region to adopt the rate cut decision, which boosted the IPSA. Investors found the market more attractive, in line with what is also expected in other Latin American countries at a later date.
Another market that rises significantly month after month is Argentina’s Merval (MERVAL), which, despite Monday’s fall, closed July with an increase of 7.24%. The Argentine stock market is the second-best performer in the region, behind Chile’s IPSA, and maintains its leadership in Latin America so far in 2023.
In third place in the monthly ranking is the Lima Stock Exchange, which rose 5.28% in July and is up more than 10% so far this year.
In contrast, although it also closed a positive month, the market with the lowest performance in July compared to its regional peers was Mexico’s S&P/BMV IPC index (MEXBOL), which recorded a gain of 2.42% during July, and has appreciated by more than 13% since the beginning of the year.
🗽On Wall Street:
Stocks finished higher in the final day of July as the S&P 500 notched its longest streak of monthly gains since August 2021, defying worries about an overheated market.
Wall Street has looked past concerns about an earnings recession as economic data bolstered hopes on a soft landing despite the Federal Reserve’s rate hikes. Signs are beginning to point to capitulation among bearish institutional investors, economists and strategists as market returns continue to challenge expectations, said Mark Hackett at Nationwide.
Citigroup Inc.’s Scott Chronert has joined the list of strategists who have revisited their gloomy outlooks in recent weeks, raising his forecast for the S&P 500. Morgan Stanley’s Michael Wilson, who has been among the market’s leading pessimists throughout 2023, changed his tone and now sees the rally running further.
“The challenges companies have endured – stubborn inflation, weak markets, and sluggishness internationally – are no longer headwinds,” Hackett noted. “Now, we’re not only seeing tailwinds heading into 2024, but we’re getting less disruptive reactions in the stock market following earnings reports.”
The S&P 500 edged higher to around 4,590 Monday, closing at a 16-month high. The megacap space saw subdued action, with Apple Inc. and Amazon Inc. due to report earnings in the coming days. The Nasdaq 100 notched its longest streak of monthly gains since August 2020. Treasury 10-year yields traded near 3.95% while the dollar posted a small gain.
Word of caution
To Matt Maley at Miller Tabak + Co., investors need to be careful about extrapolating what we’ve seen this year in stocks, and it’s essential to have a backup plan for when the “fear of missing out” fades or “some compelling cracks” start to form. He’s among those betting broad equity averages will see limited upside over the next couple of months.
“Is merely ‘avoiding a recession’ really enough to push the stock market a lot higher from its expensive level? said Maley. “Investors need to be careful about trying to squeeze every last penny out of this rally in the stock market over the coming days and weeks given that many of the best stocks are quite expensive.”
The stock market has been seasonally more muted in August, but if history is any guide, the S&P 500 could see more gains after a five-month winning run. In the prior 37 such streaks since 1928, the gauge extended gains into a sixth month almost 80% of the time, according to Bespoke Investment Group.
In corporate news, Exxon Mobil Corp. climbed as Bloomberg News reported it’s in talks with Tesla Inc., Ford Motor Co. and other automakers about supplying them with lithium. SoFi Technologies Inc. surged 20% as the online bank raised its revenue guidance. Yellow Corp., which hauls about 15% of major companies’ so-called less-than-truckload shipments, soared after ceasing operations and telling union leaders that it plans to file for bankruptcy.
Fed Survey
Traders took a Federal Reserve survey of lending officers in stride. As hinted by Chair Jerome Powell, the central bank said financial institutions reported tighter standards and continued weak demand for loans in the second quarter, extending a trend that began before recent stresses in the banking sector emerged.
Meantime, Fed Bank of Chicago President Austan Goolsbee said data showing slower inflation is “fabulous news,” but he hasn’t yet decided on whether to support pausing rate hikes at the next policy meeting. Over the weekend, his Minneapolis counterpart Neel Kashkari said the inflation outlook is “quite positive,” though the central bank’s aggressive tightening will likely result in some job losses and slower growth.
Elsewhere, the yen dropped after the Bank of Japan announced an unscheduled bond-purchase operation to tamp down rates after adjusting policy on Friday to allow benchmark yields to climb as high as 1%.
- The Bloomberg Dollar Spot Index rose 0.2%
- The euro fell 0.2% to $1.0995
- The British pound fell 0.1% to $1.2834
- The Japanese yen fell 0.8% to 142.25 per dollar
🍝 For the dinner table debate:
According to a recent report by Bloomberg Linea, at least 17 lithium-mining projects are underway or about to enter that stage in Argentina, Chile, Brazil and Bolivia, but the business environment is pointed out as a key factor to ensure the development of the industry, at the risk of losing investments to other regions.
Currently Australia, Argentina, Chile and Brazil account for 84% of the world’s mineral production and hold around 80% of global reserves, according to a KPMG study. Another Latin American country, Bolivia, has enormous potential in the sector, with an estimated reserve of some 21 million tons of certified lithium, but so far has not explored efficiently, the study notes.
KPMG’s Latin America energy and natural resources leader, Manuel Fernandes, told Bloomberg Línea that geographically, the map of large lithium reserves has changed. “Lithium has gained a lot of prominence especially with the trend towards electrification of cars. With that, the mineral now has a greater appeal and the projects are huge,” the executive said.
Paola Villar S, a content producer at Bloomberg Línea, and Rita Nazareth of Bloomberg News, contributed to this report
