Colombia Leads LatAm Market Gains; NYSE Closes Higher Amid Signs Inflation Has Peaked

Chile’s IPSA index saw the sharpest losses in Latin America on Tuesday, while US markets are being buoyed by the prospect that inflation has touched its ceiling

Los operadores trabajan en el parqué de la Bolsa de Nueva York.
By Bloomberg Línea and Bloomberg News
November 15, 2022 | 09:29 PM

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

👑 Colombia leads the gains in Latin America:

Latin American stock markets closed mixed on Tuesday. Colombia’s Colcap (COLCAP) and Argentina’s Merval (MERVAL) were the region’s leaders in terms of gains.

The Colombian stock market closed with a gain of 1.48%, driven by the performance of the materials, energy and utilities sectors. The shares of Cementos Argos (CEMARGOS), Celsia (CELSIA) and Ecopetrol (ECOPETL) were among the best performers of the trading session.

Ecopetrol informed that its exit from the MSCI as of November 30 is due to an update of the methodological calculations related to the number of freely traded shares and their minimum market value and not to the company’s performance or the liquidity of the share, which continues to be one of the most traded shares on the Colombian Stock Exchange.

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On the other hand, Colombia’s foreign purchases continue on a high. In September 2022, imports of fuels and products of extractive industries were $630 million and presented an increase of 30.5%, compared to September 2021; the products that contributed most to the increase were petroleum, petroleum products and related products (34.2%), which contributed 25.8 percentage points to the total variation of the group.

The Argentinea index, on the other hand, continued its upward streak and closed with a 1.62% increase, mainly driven by the energy sector. The shares of Transportadora de Gas del Norte (TGNO4), Transportadora del Gas del Sur (TGSU2) and Pampa Energía (PAMP) drove the index’s gains.

📉 A bad day for Chile’s IPSA:

Chile’s Ipsa (IPSA) and the S&P/BVL Peru (SPBLPGPT) closed with the sharpest losses in the region during Tuesday’s session.

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The Chilean stock market dropped 1.19%, dragged down by the performance of the materials, energy and communication services sectors. The shares of Sociedad Química y Minera de Chile (SQM/B), Sociedad Inversiones Oro Blanco (OROB) and Enel Chile SA (ENELCHIL) saw the sharpest declines.

SQM fell 3.93% on Tuesday following the sell-off of its Asian peers amid concerns about the possible decline in lithium demand from Chinese companies. Tomorrow, after market close, the company is expected to report that its third quarter net income rose almost 700% year-on-year. Itaú BBA analysts see lithium and iodine operations as the highlights of that quarter, although they expect demand for this one to decline.

Workers at Minera Escondida, the most productive copper mine in the world, will go out on strike on November 21 and 23. Union number 1 of the mining company, made up of more than 2,400 workers, said that the strikes will apply to “all the shifts of its members”. According to a communiqué, the strike is due to “multiple breaches, infractions and violations” that the BHP company is allegedly committing.

The Peruvian stock market closed down 0.35%, affected by the performance of the consumer staples, industry and utilities sectors. The shares of Enel Distribución Perú (ENDISPC1), Alicorp SA (ALICORC1) and Cementos Pacasmayo (CPACASC1) dragged down the S&P/BVL Peru.

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🗽 On Wall Street:

US stocks rose as fresh data added to evidence inflation may have peaked, strengthening the case for the Federal Reserve to moderate its pace of interest-rate hikes. Treasuries also ended Tuesday higher while the dollar fell.

The S&P 500 climbed 0.9% and the tech-heavy Nasdaq Composite (CCMPDL) gained 1.45%, to close at its highest level since September 19. While equities soared for most of Tuesday’s session, it gave back some of its gains after an Associated Press report citing an unidentified US intelligence official said that Russian missiles landed in NATO-member Poland.

The Dow Jones Industrial Average gained 0.17%.

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Commodities from oil to corn also jumped on geopolitical worries from Europe. While Poland later said an explosion near its eastern border with Ukraine killed two people, it didn’t confirm the Associated Press report.

Markets have turned risk-on in recent days, trading off a softer-than-expected US consumer price index reading that many reckon will allow the Fed to raise rates in half-point increments. While a slew of Fed speakers in recent days indicated that officials could slow their tempo, they also emphasized the central bank has more work to do to tame inflation.

On Tuesday, the producer price index for October came in at 8% year-on-year, undershooting the 8.3% estimate and further easing inflation concerns.

Still, some investors are not convinced the recent data will do much to move the Fed.

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“Markets appear to be pricing in a best case scenario of a soft landing and falling inflation triggering a Fed pause,” Venu Krishna, head of US equity strategy at Barclays Plc. “In our view, this is not a given and remains a low probability scenario – these are just a few data points on inflation and it needs to be sustained. Even if the Fed eventually pauses, it might not be able to prevent a shallow recession.”

On the currency markets, the Bloomberg Dollar Spot Index fell 0.3%, the euro rose 0.3% to $1.0353, the British pound rose 0.9% to $1.1863 and the Japanese yen rose 0.5% to 139.21 per dollar.

🔑 The day’s key events:

The news of a Russian missile landing in Poland and causing fatalities also coincided with Hungary’s announcement that amid shelling that hit Kyiv and other targets in Ukraine, a power plant belonging to Hungarian energy company MOL, which serves Druzhba, Europe’s largest oil pipeline, was hit by artillery fire, causing deliveries and operations to be halted.

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West Texas Intermediate reversed the day’s losses on the two reports, rising as much as 3.3% to close near $87 per barrel. Meanwhile, Brent rose 0.69% to close above $93.

“The market is going to have to recalibrate the potential risk to global oil supplies if this war escalates,” said Phil Flynn, a senior market analyst at Price Futures Group. “It’s going to be critical to see how NATO and the US decide to respond to this provocation.”

🍝 For the dinner table debate:

Some Latin American leaders would like to have a single currency in the region, but this would not be so viable, according to Benjamin Ramsey, leader of JPMorgan’s Latin America economic research team.

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Although this proposal is not new, it was recently mentioned by several leaders in the region, including Chile’s President Gabriel Boric, Brazil’s President-elect Luiz Inácio Lula Da Silva and Colombia’s Senate President Roy Barreras.

“In our view, the coordination required amid the large institutional differences between countries and sensitive sovereignty considerations greatly undermines any prospect of a regional currency. We would be surprised if this idea were to become a formal proposal, even outside the design phase,” the JPMorgan expert highlighted.

“Latin America, in order to achieve a single currency, first has to make an integration treaty and create a binding Latin American parliament like the European Parliament,” Roy Barreras, president of Colombia’s Congress of the Republic, said in late October.

Sebastián Osorio Idárraga, a content producer at Bloomberg Línea, and Isabelle Lee and Vildana Hajric of Bloomberg News, contributed to this report.