A roundup of Friday’s stock market results from across the region
👑 Chile leads in Latin America:
Chile’s Ipsa (IPSA) was the only Latin American stock exchange to close the day with gains, after the previous session was one of the highest among the region’s main indexes.
The indicator registered a modest rise of 0.23%, driven by the performance of the consumer discretionary, industry and communication services sectors. Shares of Engie Energía Chile (ECL), Ripley Corp. (RIPLEY) and Quinenco (QUINENC) were among those that led the day’s gains.
According to the International Monetary Fund (IMF), Chile will be the only country in Latin America with a fall in its GDP in 2023 and that the Chilean economy will contract -1% next year. In view of these projections, this Friday, President Gabriel Boric acknowledged the restrictive scenario for the country, but pointed out that “this has an explanation”.
The president said the country had a “very large expansion of consumption”, which implied GDP growth of 11.7% in 2021, as a result of the withdrawals of pension funds and state aid called Emergency Family Income. He also pointed out that this consumption boom was not associated with an “expansion of productivity”.
📉 A bad day for the rest of Latin America:
Most of the region’s stock exchanges closed with losses following the mood of the US markets. Argentina’s Merval (MERVAL) and Brazil’s Ibovespa (IBOV) were the most negative performers during the day.
The Merval closed with a 2.47% drop after being crowned on Thursday as the index with the highest increase among its peers in the region. The Argentinean indicator was dragged down by the performance of the shares of Sociedad Comercial del Plata (COME), del Banco de Valores (VALO) and Agrometal (AGRO).
Inflation in Argentina continues apace and hit 6.2% monthly in September, the fourth highest rate of the year. The Consumer Price Index for the ninth month of the year shows a slight deceleration after 7% in August and the peak of 7.4% reached in July.
On the other hand, year-on-year inflation reached 83% and, as has been the case in recent months, reached a 30-year high. This is the highest figure in 370 months, since November 1991.
The second biggest losses were seen on Brazil’s Ibovespa,, which closed 1.95% lower, its second consecutive day in the red.
La mayoría de las bolsas de la región cerraron con pérdidas siguiendo el ánimo de los mercados de Estados Unidos. El Merval de Argentina (MERVAL) y el Ibovespa de Brasil (IBOV) fueron los que registraron los comportamientos más negativos en el día.
Shares of Magazine Luiza (MGLU3), Americanas SA (AMER3) and Yduqs Participacoes (YDUQ3) saw the sharpest losses on Friday.
🗽 On Wall Street:
US stocks fell after a report showed US year-ahead inflation expectations rose for the first time in seven months. The dollar gained and Treasuries fell.
The S&P 500 closed near lows of the day, falling more than 2%. The growth-sensitive Nasdaq 100 posted the steepest losses, dropping just over 3% as Treasury yields climbed, with the two-year rate rising back to 4.5%. Both indexes posted their first weekly declines this month.
The Nasdaq Composite (CCMPDL) plummeted 3.08% and the Dow Jones Industrial Average slipped 1.34%
Equity markets turned sharply lower after a University of Michigan survey showed year-ahead inflation expectations rose in early October and the long-term outlook also crept up. The uptick is potentially worrisome for the Federal Reserve’s efforts to keep views anchored. It also follows data a day earlier that showed a key measure of consumer prices accelerated in September to a 40-year high. On Thursday, however, stocks roared back from early losses in one of the biggest reversals on record.
“Yesterday you had this amazing, powerful intraday rally that was completely wrong,” said Phil Orlando, chief equity market strategist at Federated Hermes. “Then you look at the Michigan numbers this morning that’s consistent with what we’re seeing in the economy, and the stock market now is down to reflect that number. That’s correct.”
Corporate America offered some bright spots, with big banks including JPMorgan Chase & Co. and Wells Fargo & Co. rising after reporting results, while Morgan Stanley fell as equity trading revenue disappointed. UnitedHealth Group Inc. shares gained after the health-care giant beat profit forecasts in the third quarter and raised its outlook for the year.
Earnings next week will provide clues on the strength of a swathe of companies, including Bank of America Corp., Goldman Sachs Group Inc., Johnson & Johnson, Netflix Inc., Tesla Inc. and United Airlines Holdings Inc.
In the latest Fed comments, officials suggested they’re ready to hike rates higher than previously planned. Kansas City Fed President Esther George said the terminal rate may need to be higher to cool prices. San Francisco Fed’s Mary Daly said she’s “very supportive” raising to restrictive levels and to between 4.5% and 5% “is the most likely outcome.”
Forecasts they released last month showed rates reaching 4.4% by year end and 4.6% next year, from a current target range of 3% to 3.25. Swaps traders have boosted wagers for rate hikes over the past week following strong payrolls and hot inflation readings, with the market leaning toward back-to-back jumbo hikes at the next two meetings and a high above 4.9% next year.
“A lot of investors are looking at inflation to get guidance on what the Fed is going to do, to find the bottom in the market once the Fed pivots,” Jerry Braakman, chief investment officer and president of First American Trust, said in an interview. “But looking at CPI, unemployment, there’s obviously a lot of heat in the economy. Inflation is going to take some time to come down.”
In the UK, bonds and the pound fell to end another tumultuous week. Gilts slid as Prime Minister Liz Truss confirmed speculation she will U-turn on a planned freeze on corporation tax. The Bank of England ended its emergency bond purchases on Friday, buying £1.45 billion of long-dated and inflation-linked gilts. In the wake of that, 30-year yields rose 23 basis points at 4.78%, after swinging from a drop of over 30 basis points earlier.
Elsewhere, oil posted a weekly loss as inflation-fighting measures and muted Chinese demand soured the market’s outlook, blunting some of the sting from OPEC’s upcoming supply curtailments.
Regarding currencies, the Bloomberg Dollar Spot Index rose 0.7%, the euro fell 0.5% to $0.9729, the British pound fell 1.2% to $1.1186, and the Japanese yen fell 1% to 148.60 per dollar.
🔑 The day’s key events:
Oil closed the week with losses amid fears of a recession and weak demand from China.
West Texas Intermediate (WTI) settled below $86 a barrel, falling 7.6% this week. US core inflation, a key data point for the Federal Reserve’s monetary policies, reached its highest level in 40 years last month, raising expectations that the Fed will continue to raise interest rates. Concerns are that energy consumption could be affected given slow economic growth.
Crude oil was also hit this week as demand in China, the world’s largest importer, remains weak as the government continues its Covid Zero policy. In addition, the International Energy Agency warned that OPEC’s production cuts of two million barrels per day could push the global economy into recession.
“All the news on crude demand is becoming very bearish for crude,” said Edward Moya, market analyst at Oanda. “So far, earnings season and inflation expectations support the idea that the Fed will have to keep tightening until it sends the economy into a recession.”
El petróleo cerró la semana con pérdidas en medio de los temores de una recesión y la escasa demanda de China.
🍝 For the dinner table debate:
The relentless strength of the US dollar is a problem for almost everyone, but it is the one challenge that global economic experts cannot address head-on.
The currency has soared nearly 15% this year. It is on track for its biggest annual gain since the early 1980s. Countries in Asia and Latin America have dipped into their foreign exchange reserves in an effort to shore up their currencies, prompting a warning from the IMF about the need to be prudent and preserve resources for a potentially worse time.
Of greater concern to the rest of the world is that the Federal Reserve’s campaign to quell runaway inflation by raising U.S. interest rates (a key driver of the dollar’s strength) is not yet over.
This means that monetary pressures could worsen further, as the rising dollar helps to contain consumer prices in the US but threatens to send them spiraling in the rest of the world.
-- Leidys Becerra, a content producer at Bloomberg Línea, and Stephen Kirkland and Lu Wang of Bloomberg News, contributed to this report.