A roundup of Thursday’s stock market results from across the Americas
👑 Argentina’s Merval leads in Latin America:
The International Monetary Fund highlighted that one of the key commitments that Argentina will have to face is the reduction of inflation. The organization’s prescription to achieve this involves adopting more restrictive policies. “The adoption of more restrictive policies under the IMF-supported program will be critical to underpin stability and contain inflation, which is now projected to rise to 95% by the end of 2022″, the Fund said.
Meanwhile, Peru’s index posted a gain of 0.66%, driven by the performance of the consumer staples, financials and materials sectors. Shares of Alicorp SA (ALICORC1), Cementos Pacasmayo (CPACASC1) and Compañía de Minas Buenaventura (BVN) led the Peruvian stock market gains.
Minas Buenaventura announced today that it “progressively” resumed work on the construction of the San Gabriel gold and silver mine after reaching an agreement with local authorities and communities in the area of influence. The $450 million to $470 million project, located in Moquegua, had been stalled since June.
“When we started this problem, we were beginning pre-construction work. Currently, I would say that we are at 1% of construction. Work on the operation has already started and, so far, we are in a soft start process,” said Renzo Macher, the company’s project manager.
📉 A bad day for Colombia’s Colcap:
The Colombian stock market plummeted 2.38%, dragged down by the performance of the utilities, finance and consumer staples sectors. Shares of Inversiones Suramericana (PFGRUPSU), Bancolombia (BCOLO) and Promigas (PROMIG) saw the sharpest losses.
The Colombian Senate approved the tax reform presented by the government of Gustavo Petro. Now the debate in the House of Representatives is pending. Healthy taxes were approved: beverages will start paying from July 2023 and ultra-processed food from September 2023. The green light was also given to the income surtax for banks and electricity companies.
The mining and energy sector will be subject to a rent surcharge based on the international price of the last 10 years. For oil this would be progressive: 5%, 10% and 15%; and for coal 5% or 10%. And another important point: there will be no deductibility of royalties in income tax. This has been criticized by companies in the hydrocarbon sector, which have stated that not having this benefit would cause the closure of companies due to the alleged unfeasibility of the business.
On the other hand, the Mexican indicator fell 1.28%, impacted by the materials, industries and basic consumer products sectors.
🗽 On Wall Street:
US stocks sank before Friday’s jobs data amid concern that a deeper recession could be in store with the Federal Reserve expected to hold rates at a higher level for longer to tame inflation.
The S&P 500 saw its fourth straight decline, dragged down by big tech as Treasury yields climbed. Apple Inc. (AAPL) tumbled over 4% and Amazon Inc. (AMZN) suffered its longest slide since 2019. A key segment of the Treasury curve reached new extremes of inversion, touching a level not seen since the 1980s when the Fed was aggressively tightening. Curve inversions have a track record of preceding economic downturns.
The El S&P 500 dropped 1.06%, the Dow Jones Industrial Average 0.46% and the Nasdaq Composite (CCMPDL) 1.73%.
Swaps that reference future Fed meetings indicate an expected peak rate above 5.1% around mid-2023. Estimates briefly dropped below 5% on Wednesday. The benchmark rate currently sits in a range of 3.75% to 4%.
“Remember, ‘lower for longer’ in 2021 in terms of the interest rate environment?,” wrote Matt Maley, chief market strategist at Miller Tabak + Co. “Well, now we have ‘higher for longer’… as well as ‘slower but higher.’ A rise in short-term rates might take longer to play out, but they’re headed for a higher level than the markets have been thinking.”
While projections show October payroll growth moderated to 198,000, such an increase would still be higher than a monthly pace shy of 100,000 that economists reckon is neither too strong nor too weak for the economy over the longer term. Applications for unemployment insurance hovered around historically low levels, reinforcing what Fed Chair Jerome Powell described as an “overheated” jobs market.
Markets are rightly more concerned with the ultimate level of rates rather than the pace of tightening, according to Mark Haefele, chief investment officer at UBS Global Wealth Management -- who doesn’t believe the conditions are in place for a sustained stock rally.
“The Fed, along with other major central banks, looks likely to keep tightening rates until the first quarter of 2023,” Haefele noted. “Economic growth will likely continue to slow into the start of the new year, and global financial markets are vulnerable to stress while monetary policy continues to tighten. Such headwinds have yet to be fully reflected in earnings estimates or equity valuations.”
The pound slumped as the Bank of England told investors to rein in expectations for hikes.
European Central Bank President Christine Lagarde warned that a “mild recession” is possible, but that it wouldn’t be sufficient in itself to stem soaring prices. The comments are part of a raft of public appearances by ECB officials, as investors and analysts ponder the twin challenges of record price growth and a likely economic downturn, due largely to Russia’s invasion of Ukraine.
In corporate news, Peloton Interactive Inc. delivered a weaker estimate for the current quarter than Wall Street was predicting, even as management declared that it was beating its own timeline for turning around the fitness company. Moderna Inc. earnings offered a preview into the future of Covid-19 vaccine sales, and so far it doesn’t look pretty. Qualcomm Inc., the biggest maker of smartphone processors, gave a weaker forecast than expected.
On the currency markets, the Bloomberg Dollar Spot Index rose 0.6%, the euro fell 0.7% to $0.9750, the British pound fell 2% to $1.1163 and the Japanese yen fell 0.2% to 148.23 per dollar.
🔑 The day’s key events:
Oil closed with losses on Thursday, halting a two-day rally. Following Powell’s remarks on Wednesday, investors shied away from risk assets while the dollar soared, making commodity prices in the currency less attractive.
West Texas Intermediate for December delivery fell to around $88 per barrel, after rising 4% in the previous two sessions. While the Brent benchmark for January settlement closed at around $94.60 per barrel.
With the world’s major central banks trying to control inflation with back-to-back rate hikes, fears of a recession outweigh signs of a tighter fuel market.
“The correlation between daily stock movements and energy prices has increased over the past two weeks, so some of that negative outlook appears to be spilling over into the energy arena as well,” wrote analysts at wholesale fuel distributor TACenergy.
🍝 For the dinner table debate:
Elon Musk has removed “rest days” from the calendars of Twitter Inc (TWTR) staff, according to people familiar with the matter. The monthly day off, which was granted to all company employees, was introduced during the period of the Covid-19 pandemic, and its termination is another sign of Musk’s impatience with the existing work culture at the social networking company.
In addition, Musk plans to cancel the remote work policy and have staff who are spared a mass layoff return to the offices to work full time. This would be just the beginning of the many changes that the CEO of Tesla Inc (TSLA) wants to implement at Twitter.
Leidys Becerra, a content producers at Bloomberg Línea, and Rita Nazareth of Bloomberg News, contributed to this report.