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Colombia’s COLCAP Bucks Upward Trend in LatAm; Fed’s Rate Hike Lifts U.S. Markets

Colombia’s index was the only one in Latin America to register losses on Wednesday as the interest rate hike by the Federal Reserve impacted oil prices and lifted U.S. indices

(Photographer: Al Drago/Bloomberg)
By Bloomberg Línea and Bloomberg News
June 15, 2022 | 07:35 pm

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

👑 In Latin America:

The recovery of the U.S. stock markets on Wednesday following a rate rise by the Federal Reserve had a positive impact on Latin America’s markets and, with the exception of Colombia’s COLCAP index, all the region’s stock markets recorded gains.

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The best performance came from Argentina’s Merval (MERVAL), which benefited from the international context.

Brazil’s Ibovespa (IBOV) rose thanks to the performance of the consumer discretionary, healthcare and information technology sectors. Brazilian investors were expectant for a decision of the central bank on whether to raise interest rates, and which came in at 50 basis points, to 13.25%, in line with investor and analyst expectations.

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The Mexican stock market also followed the trend and the S&P BMV/IPC (MEXBOL) advanced 0.37%.

The best performing sectors on the Mexican exchange were healthcare, consumer staples, and industrials.

📉 A Bad Day:

Volatility persisted on the Colombian stock market continued and the COLCAP was the only Latin American market to register losses on Wednesday, dropping more than 2%, continuing its seesaw amid the international scenario and uncertainty generated by the presidential election runoff this Sunday, in which candidates Gustavo Petro and Rodolfo Hernandez will face off.

The Colombian stock market performance was also hit by the fall of Ecopetrol (ECOPETL) shares, the most traded stock of the day, after oil prices fell below $120 per barrel.

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🗽 Bloomberg News: Wall Street and the World

Stocks and bonds received a boost from Federal Reserve Chair Jerome Powell’s comment that super-sized interest-rate hikes will be rare following the central bank’s biggest increase in borrowing costs since 1994.

Equities in Japan, South Korea and Australia got a tailwind Thursday from a Wall Street rally that halted a five-day, 10% rout in the S&P 500. US contracts climbed almost 1%.

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Bonds in Australia and New Zealand jumped after Treasury yields tumbled as traders pared bets on Fed tightening next month -- no longer fully pricing in a three-quarter point move.

The Fed raised rates by that amount Wednesday, stepping up the fight against inflation. Powell signaled another big hike in July but added “today’s 75 basis-point increase is an unusually large one and I do not expect moves of this size to be common.” That leans against the risk of a string of jumbo moves.

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A dollar gauge mostly held a retreat, while the yen and risk-sensitive currencies like Australia’s dollar trimmed gains from Wednesday. Cryptocurrencies, which have become emblematic of recent market stress due to tightening financial conditions, staged a broad advance.

Wednesday’s decision took the target range for the federal funds rate to 1.5% to 1.75%. Officials projected 3.4% by year-end and 3.8% by the end of 2023. The Fed also reiterated it will shrink its balance sheet by $47.5 billion a month -- a move that took effect June 1 -- stepping up to $95 billion in September.

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“75 basis points is a solid showing that will, all else being equal, serve to improve Fed credibility and leave monetary policy slightly less behind the inflationary curve,” Benjamin Jeffery and Ian Lyngen, strategists at BMO Capital Markets, wrote in a note. “The response in risk assets will ultimately define the extent to which the Fed will be able to normalize monetary policy.”

Whether the rebound in stocks and bonds is anything more than temporary is in doubt. Fears of an environment of sharply slower economic growth and elevated price pressures continue to shadow markets.

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Recession Risk: An unexpected first-quarter contraction in New Zealand’s economy amid rising borrowing costs underlines worries about recession risks in a range of nations.

From Friday through Tuesday, US Treasury yields surged in one of the biggest selloffs in decades and global equities fell into a bear market.

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“The market reaction is relatively muted in my opinion and if anything it’s a relief rally,” Kristen Bitterly, head of North America investments at Citi Global Wealth, said on Bloomberg Television, referring to the post-Fed moves.

Another question is whether Chinese stocks can continue recent outperformance of global peers. In Japan, investors are increasingly uncertain about the sustainability of a pledge to cap yields with super-easy monetary settings.

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In commodity markets, crude oil pushed higher and gold held a rally.

🍝 For the Dinner Table Debate:

Wednesday was the last day of Internet Explorer, Microsoft’s (MSFT) famous browser, once the strongest competitor in its sector, but which now says goodbye to Internet users with only a negligible market share.

The decision comes after the company stopped developing new features and updates for the browser and focused since 2016 on a new one - Microsoft Edge.

Since then users constantly reported failures in Explorer’s performance and poor speed in searches.

According to Vlad Savov and Marika Katanuma, in a report for Bloomberg News, “Japan may be the country most affected by the move, as a survey in March found that 49% of companies in the Asian nation still use IE. Among them, the most common use was for in-house management, data exchange and accounting systems. All of those should have been updated or transitioned to different software in the time since Microsoft announced its IE retirement plans a year ago, but the Nikkei reports that many procrastinated.”

By 2003, Internet Explorer was the most-used browser by web users, with a market share of 95%, but over the years, the browser lagged behind with changes in focus of the business model and stronger competition from other technology companies such as Alphabet Inc’s (GOOGL) Google, and Mozilla.

Now, after 27 years, it is saying goodbye with a market share of 0.64%, Bloomberg News reported. The company assures that Microsoft Edge will offer a “faster, safer and more modern experience than Internet Explorer search”.

-- Carlos Rodríguez Salcedo, a content producer for Bloomberg Línea, and Sunil Jagtiani, of Bloomberg News, contributed to this report