A roundup of Tuesday’s stock market results from across the Americas
🌎 Colombia leads LatAm market gains:
The majority of Latin American stock exchanges closed higher, following in the footsteps of Wall Street. Only two stock markets in the region showed declines: the Lima Stock Exchange (SPBLPGPT), which was mainly affected by the performance of the electricity sector (-1.57%), and the Brazilian stock exchange (IBOVESPA), with its main index falling 0.61%.
In contrast, the MSCI index of the Colombian Stock Exchange (COLCAP) rose 1.51% and led regional gains, reaching 1,147.86 points. The sectors that drove the Colombian stock market’s gains were energy (2.62%), consumption (1.90%) and finance (1.41%).
Colcap’s traded volume amounted to US$8.5 million, led by the movement of Ecopetrol (ECOPETL) and PFB Colombia (PFBCOLO). Credicorp Capital Bolsa highlighted that the papers with the highest upward movement were Corporación Financiera Colombia (2.14%) and Ecopetrol (1.99%); and the worst performers were Banco Bogotá (-0.92%) and Banco Davivienda (-0.72%).
In second place was the S&P index of the Mexican Stock Exchange (MEXBOL), with an increase of 0.90% to 54,138.14 points. Communication services (2.68%), health (1.88%) and real estate (1.12%) were the sectors that drove the gains of the Mexican index; while the best performing shares in the session were those of Controladora AXTEL (CTAXTELA), with a rise of 11.21%, and América Móvil (AMXB) shares, with a rise of 2.96%.
🗽On Wall Street:
The stock market finished higher before a report that’s expected to show a slowdown in inflation, which will help shape the outlook for the Federal Reserve’s next steps.
In the run-up to the consumer price index, the S&P 500 extended its advance beyond the 4,400 mark while the Dow Jones Industrial Average added almost 1%. Energy producers led gains as West Texas Intermediate oil topped its key 100-day moving average. Activision Blizzard Inc. surged 10% as Microsoft Corp. won a US court’s OK to proceed with its $69 billion takeover deal.
A survey conducted by 22V Research shows that 65% of respondents believe the core CPI — which excludes volatile food and energy prices — will be lower than consensus. In addition, 54% of the investors polled expect the report to be “risk-on.”
“If economic data keeps tilting towards a soft landing, the markets are increasingly likely to price in that outcome, with investors reallocating to risk assets,” said Jason Draho, head of asset allocation Americas at UBS Global Wealth Management.
A June CPI that’s in-line with expectations would be another step in that direction, he added.
Forecasters surveyed by Bloomberg expect the year-over-year rate of increase in core inflation moderating to 5%, according to the median estimate. But the slowdown will possibly not be enough to prevent additional policy tightening, with Fed officials widely expected to resume interest-rate increases later this month.
“A quarter-point hike on July 26 is a forgone conclusion at this point, and Wednesday’s CPI release will be more relevant to the September/November debate,” said Ian Lyngen at BMO Capital Markets.
Inflation peaks
After surging by a four-decade high in June 2022, CPI has pulled back steadily in the face of the Fed’s monetary policy onslaught. That slowdown has given support to the stock-market’s surge this year, and bulls have strong precedent for their enthusiasm.
Since the 1950s, inflation peaks have almost always been followed by double-digit equity gains, according to data compiled by the Leuthold Group. The S&P 500 has gained more than 20% since it bottomed out in October, placing it up about 15% since the peak CPI data was released last year.
Following the inflation data, traders will shift gears to the second-quarter earnings season, with JPMorgan Chase & Co., Citigroup Inc. and Wells Fargo & Co. reporting their numbers Friday.
In 2023, gains in the S&P 500 have been more concentrated among its largest stocks than in any six-month period since the turn of the millennium, resulting in expensive valuations for the index’s biggest names. That means the earnings season, along with policy cues are poised to “make or break the case” for those premiums to hold, said Gina Martin Adams, chief equity strategist at Bloomberg Intelligence.
Strong equity performance this year has created a dilemma for investors who are underweight equities, according to UBS’s Draho.
“They can stay cautiously positioned, which can be painful absent a recession,” Draho noted. “The alternative is to increase equity allocations, but at the risk of getting whipsawed if a recession has only been delayed not averted.”
Elsewhere, oil rose amid indications that Russian crude production is dropping, signaling the market’s supply glut may be coming to an end. Adding to bullish sentiment is news that China will take more steps to revive its economy with additional stimulus.
- The Bloomberg Dollar Spot Index fell 0.3%
- The euro was little changed at $1.1006
- The British pound rose 0.5% to $1.2931
- The Japanese yen rose 0.7% to 140.39 per dollar
🍝 For the dinner table debate:
One of the most talked-about news of the day has been the call by NATO members on the possible accelerated accession that would be offered to Ukraine, in the middle of the war conflict that this country still maintains with Russia and the situation of geopolitical tension that has been maintained since the war started.
NATO leaders said the European country will be invited when certain conditions are met and to remove bureaucratic barriers to speed up the process when that time comes. Bloomberg reported that it was agreed along those lines that Ukraine won’t need a so-called Membership Action Plan to prepare for joining the alliance, according to people familiar with the matter who asked not to be identified as they discussed private talks.
The compromise offers Ukrainian President Volodymyr Zelenskiy a more concrete prospect of securing full military protection from the U.S. and its allies, although it falls short of the clear road map he was asking for.
“This will change Ukraine’s accession path from a two-step process to a one-step process,” Stoltenberg said. Members “will issue an invitation for Ukraine to join NATO when the allies agree and the conditions are met.”
