Chile’s IPSA Sees Sharpest Hike Since 2021; US Stocks Suffer Third Weekly Loss

A roundup of Friday’s stock market results from across the region

👑 Chile leads in Latin America:

Latin America’s stock exchanges remained removed from the losses in the United States on Friday, with Chile’s IPSA (IPSA) index leading the day with a hike of more than 4%, its highest daily increase since November 22, 2021 as shares were given a boost by the victory of José Antonio Kast in the first round of the presidential elections, and before Gabriel Boric would win the second round to become the current president.

On this occasion, the market reacted positively amid expectations of Sunday’s plebiscite in which citizens will vote to accept or reject the draft of the new constitution.

Felipe Hernandez, an economist at Bloomberg Economics, said in a report that a pro-status quo decision may reduce selling pressure on local assets, but warned that investors should be aware that it would not solve problems in the country.

The hikes on the Chilean stock market were also seen in the Brazilian and Mexican markets, which marked their second consecutive day of gains.

The S&P/BMV IPC (MEXBOL) was boosted by the non-core consumer products, communication services and financials sectors. Brazil’s Ibovespa (IBOV) was boosted by the positive performance of the health care, real estate and industrial sectors.

🗽 On Wall Street:

US stocks suffered a third weekly loss after jobs data did little to alter views on the Federal Reserve’s next policy move.

The S&P 500 contended with its longest weekly losing streak since mid-June, as the central bank’s hawkish chorus grew louder in recent days. The index also ended Friday lower, erasing the gains it notched earlier in the session after the jobs report showed some signs of easing in a still-tight American labor market. A delay in the opening of a key gas pipeline to Europe bruised sentiment in the afternoon, ahead of a three-day weekend for American markets.

The S&P 500 and the Dow Jones Industrial Average dropped 1.07%, while the Nasdaq Composite (CCMPDL) slipped 1.31%, with the three indices chalking up their third weekly loss.

Treasuries rallied on Friday, led by short maturities. The policy-sensitive two-year yield ended the week nearly where it began, after topping 3.5% earlier.

The labor-market data on Friday add to a bevy of reports this week that validate the Fed’s assertion that the economy is robust enough to withstand more tightening. Risk assets have been under pressure since Fed Chair Jerome Powell made clear the central bank will raise rates further and keep them elevated until price gains slow. Despite the reassuring report, markets are still pricing in the likelihood of a three-quarters of a percentage point interest-rate hike this month.

“Unemployment remains relatively low, but the cause may be minimal labor force participation rather than a booming economy,” said Richard Flynn, managing director at Charles Schwab UK. “Investors will be mindful that jobs reports are a lagging indicator that are often strong heading into a recession. Indeed, broader economic indicators have been weakening recently.”

Meanwhile, in a massive blow to Europe, Russia’s Gazprom PJSC said its key gas pipeline to Europe can’t reopen as planned on Saturday as a new technical issue has been discovered. The news moves the region a step closer to blackouts, rationing and a severe recession.

Investors are already concerned about the European Central Bank possibly raising rates by three-quarters of a percentage point next week. That, combined with the restriction of natural gas supplies and escalating US-China tensions has worried investors, said Sam Stovall, chief investment strategist at CFRA Research.

Traders “don’t want to take extended long positions and thereby potentially be exposed over the long weekend,” he said.

Concern that rising rates will hurt growth has already weighed on markets, pushing global bonds into their first bear market in a generation. The Bloomberg Global Aggregate Total Return Index of government and investment-grade corporate bonds down more than 20% from a 2021 peak.

On the currency markets, the Bloomberg Dollar Spot Index was little changed, the euro was little changed at $0.9952, the British pound fell 0.3% to $1.1508, and the Japanese yen was little changed at 140.25 per dollar.

🔑 The day’s key events:

Oil prices rose on Friday despite investors continuing to watch for signs that they could hit an already tight market.

The stalemate in negotiations for a possible nuclear deal with Iran helped prop up prices, after weeks earlier optimism took over the talks and led to speculation that Iranian oil could be close to returning to the international market.

However, Iran’s response to the European Union draft, which the US State Department called “not constructive,” makes it impossible for the United States to close the deal, a source quoted by Bloomberg said.

This is in addition to investors’ expectations about the meeting of OPEC and its allies on September 5 in which the possibility of further production cuts will be discussed.

Investors also reacted to the G7′s support for the US proposal to implement a price cap on global purchases of Russian oil. However, the move is largely symbolic “as the Russians are proving able to circumvent restrictions already imposed by G7 countries and achieve record export volumes in August despite sanctions,” analysts at fuel wholesaler TACenergy wrote in a note to clients, according to Bloomberg.

🍝 For the dinner table debate:

Argentina’s stock market remained closed on Friday after President Alberto Fernández decreed a national holiday following the attack on Vice President Cristina Fernández de Kirchner on Thursday night, when 35-year-old Brazilian Fernando Andres Sabag Montiel with a conviction for carrying firearms pointed a gun at the vice president and allegedly pulled the trigger, but which did not go off.

The government announced that it would participate in a march and demonstration in Buenos Aires’ Plaza de Mayo to condemn the attack on the politician, who also served as president of the country from 2007 to 2015.

-- Carlos Rodríguez Salcedo, a content producer at Bloomberg Línea, and Elaine Chen of Bloomberg News, contributed to this report.