Colombia’s Stock Market Heads LatAm Losses; Wall Street Closes Mixed

Only Argentina’s Merval index closed with gains in Latin America on Tuesday, while only the Nasdaq 100 closed higher on the NYSE

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By Bloomberg Línea
February 14, 2023 | 10:28 PM

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

👑 Argentina’s Merval leads in Latin America:

Argentina’s Merval (MERVAL) remained ahead of the pack on Tuesday, posting the highest gains in the region again, closing 0.33% higher, with shares of Grupo Supervielle (SUPV), Grupo Financiero Galicia (GGAL) and Cresud (CRES) among the best performers on Tuesday.

Argentina’s monthly inflation for January was 6%, following a 5.1% increase in December, according to statistics bureau INDEC, while the annual variation is 98.8%. Argentina is close to joining the dubious ‘club’ of countries with three-digit inflation.

📉 Colombia’s Colcap leads the losses:

Colombia’s Colcap (COLCAP) dropped 1.41% on Tuesday, the sharpest decline in the region. Shares of Grupo de Inversión Suramericana (PFGRUPSU), Celsia SA (CELSIA) and Bancolombia (BCOLO) contributed to the downward slide.

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The markets’ attention on Tuesday was focused on proposals sent to Congress by President Gustavo Petro that seek to cut the role of private health insurers and make the government the main administrator of the $15-billion-a-year healthcare system.

Petro’s plans to reform Colombia’s welfare state faced their first big test as his supporters took to the streets to pressure lawmakers debating his controversial healthcare bill.

If the bill passes it will make it easier for Petro to push through his proposals for new pension system and labor laws, which have alarmed some investors, while a defeat would seriously weaken the government after six months in power, undermining its chances of carrying out the other reforms.

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🗽On Wall Street:

The S&P 500 Index closed nearly flat and the two-year Treasury yield added more than 10 basis points after data showed that inflation remained high. Two Federal Reserve officials then warned that the remedy might require higher interest rates for a long period of time, though one policymaker suggested that the end might be near.

The S&P 500 dropped 0.03% and the Dow Jones Industrial Average 0.46%, while the Nasdaq Composite (CCMPDL) recovered from its losses by the end of the day and closed 0.57% higher.

Swaps contracts showed traders gave near-even odds for a quarter-point rate increase by the Fed in June, following similar hikes in March and May. The rate-sensitive two-year Treasury yield rose past 4.6%.

Equity indexes fell in the morning as Federal Reserve Bank of Richmond President Thomas Barkin told Bloomberg TV that the central bank might “have to do more”to fight inflation and Dallas Fed President Lorie Logan said rate increases could last “for a longer period than previously anticipated.”

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But stocks pared losses after Federal Reserve Bank of Philadelphia President Patrick Harker said that policymakers were nearing the point where rates were restrictive enough: “In my view, we are not done yet … but we are likely close.”

“Stocks are probably rising due to Harker,” said Steve Sosnick, chief strategist at Interactive Brokers. “Close to done on tightening is vague, but certainly not a hawkish tone.”

Equity bulls clung to one CPI component that Federal Reserve Chair Jerome Powell has singled out as a must-watch: The so-called super-core figure, or core services minus housing, came in at a slower 0.3% pace in the month.

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Win Thin, currency strategist at Brown Brothers Harriman, wasn’t buying this super-core argument.

“If the market and the Fed have to get THIS granular to somehow weave an inflation argument, then they’ve lost the argument,” he wrote in a text. “Core core core core inflation? C’mon man!”

“We’ve seen lots of Fedspeak in both directions, so this is just one more data point. However, investors are really puzzled with today’s CPI print and perhaps the Harker comments help cement a bullish theme of Fed easing later this year,” Mike Bailey, director of research at FBB Capital Partners, said.

The Bloomberg Dollar Spot Index was little changed, the euro rose 0.1% to $1.0738, the British pound rose 0.3% to $1.2175 and the Japanese yen fell 0.5% to 133.04 per dollar.

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🍝For the dinner table debate:

A little less than three years after the emergence of the lockdowns to curb the Covid-19 pandemic in Latin America, there are still some economic and labor sector scars. Although most countries have been able to recover their pre-lockdown employment levels, a large part of this recovery has been due to the creation of informal jobs.

According to a study by the International Labor Organization (ILO), one out of every two employed persons in Latin America is in a situation of informality. The survey takes into account data from the following countries: Argentina, Brazil, Bolivia, Chile, Costa Rica, Dominican Republic, Ecuador, Mexico, Paraguay and Peru.

According to figures published by the ILO, at the end of the second quarter of 2022, the country where the problem of informality is most prevalent is Bolivia, followed by Peru and Ecuador. Regarding the main economies of the region, Mexico (second Latin American GDP) showed a labor informality of 53.3% of the employed. In Brazil (first regional GDP) this ratio was 37.6%. In Argentina, the third largest economy in the region, informality was 45.4%.