Colombia’s Stocks Fall With Central Bank’s Rate Rise; NYSE Maintains Downward Trend

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

👑 Mexico, Chile out front in Latin America:

Latin American stock markets closed mixed on Friday. Mexico’s Mexbol (MEXBOL) and Chile’s Ipsa (IPSA) were the region’s best performing indices, with the former gaining 0.58%, driven by the good performance of the finance, consumer staples and materials sectors. The shares of Megacable Holdings (MEGACPO), Orbia Advance (ORBIA*), Alfa SA (ALFAA) and Walmart de México (WALMEX*) were among the best performers.

The Chilean stock market gained 0.55%, supported by the performance of the information technology, communication services and energy sectors. The shares of Empresas CMPC (CCMPC), Embotelladora Andina (ANDINAB) and Parque Arauco (PARAUCO) were the best performers.

📉 A bad day for Colombia’s Colcap:

Colombia ‘s Colcap (COLCAP) and Brazil’s Ibovespa (IBOV) saw the sharpest losses on Friday.

La bolsa colombiana cayó un 0,89% arrastrado por el comportamiento de los sectores de bienes de consumo básico, productos de consumo no básico y energía.

The shares of Celsia SA (CELSIA), Grupo Nutresa (NUTRESA) and Grupo Argos (GRUPOARG) saw the sharpest declines.

Colombia’s Banco de la República (central bank) raised interest rates 100 basis points to 12%. The decision was made with the favorable vote of the majority of the members of the monetary policy board.

In November, according to figures provided by Colombian statistics agency DANE, inflation in Colombia reached its highest point in the last 23 years, reaching 12.53%.

The Ibovespa fell by 0.85%, affected by the performance of the non-basic consumer products, information technology and real estate sectors. On a weekly basis, the Ibovespa recorded a cumulative loss of 4.34%.

Shares of Vale (VALE3) and Eletrobras (ELET3) dragged down the indez, while those of Petrobras (PETR4) and Itaú (ITUB4) registered the highest gains, with fears of a recession in the US weighing on investor sentiment

🗽 On Wall Street:

US stocks suffered their longest weekly losing streak since September, with investors concerned that the Federal Reserve’s resolve to keep raising rates could tip the economy into a recession.

The S&P 500 and the tech-heavy Nasdaq 100 closed the session lower for a third day. The quarterly triple witching expiration of equity derivatives also amplified market moves on Friday.

The S&P 500 closed 1,11% lower, the Nasdaq Composite (CCMPDL) dropped 0.97% and the Dow Jones Industrial Average 0.85%.

US Treasuries were mixed, with short-term bonds rallying on Friday. The policy-sensitive two-year yield ended the week nearly 19 basis points lower than where it started. The dollar was little changed for the week. Oil notched a weekly gain.

Investors had cheered the softer-than-expected inflation data earlier this week. But that euphoria faded as Fed officials hammered home the message that rates will go higher for longer until they’re confident inflation has been subdued. While the Fed raised rates by an expected 50 basis points on Wednesday, risk assets have been on the back foot ever since policymakers signaled a peak rate that was above market expectations. A wave of rate hikes and hawkish outlooks from central banks across the globe, including the European Central Bank, further bruised sentiment this week.

Traders also contended with a flurry of US data this week showing the economy cooling, even as the labor market stays strong. Softening in the labor market remains a big target for the Fed.

“The market has been in a tug-of-war between better-than-feared economic data juxtaposed with concerns about the potential for the Fed to over-tighten monetary policy and push the economy into a recession,” said Art Hogan, chief market strategist at B. Riley Wealth. “That tug-of-war will likely continue in the first quarter of 2023 unless and until the Fed gets to their terminal Fed Funds rate.”

The Bloomberg Dollar Spot Index rose 0.1%, the euro fell 0.3% to $1.0594, the British pound fell 0.1% to $1.2162 and the Japanese yen rose 0.8% to 136.66 per dollar.

Oil prices came under pressure today on fears of an economic slowdown, which overcame the news that Joe Biden’s administration will start buying crude oil to replenish US strategic reserves. Against this backdrop, crude oil ended up falling in line with the rest of the markets.

To add further pressure to prices, parts of the Keystone pipeline have resumed flow, but at reduced pressure. West Texas Intermediate fell 2.39% to settle at $74.29 per barrel. While Brent for February delivery fell by 2.38% to $79.28 per barrel.

Although the outlook improved somewhat in recent days with the slowdown in US inflation figures and the reopening of the Chinese economy, the determination of central banks to maintain higher interest rates dampened optimism among investors.

🍝 El dato para la cena:

The Latin American labor market is still suffering the consequences of the crisis unleashed by the Covid-19 pandemic. Although employment levels improved and reached, in some cases, those recorded before the pandemic, inflationary pressures and the economic slowdown will set back the indicators.

This was reflected in the new report presented by the Economic Commission for Latin America and the Caribbean (ECLAC) on the Preliminary overview of the economies of the region, in which it stated that some variables, such as the participation rate and the labor gap between men and women, are still not at the levels seen before 2020.

In addition, for the end of 2022 and all of 2023, the UN agency says that the evolution of employment in the region will be highly conditioned by the performance of economic activity and by the evolution of inflation.

“The repercussions of a very difficult conjuncture, characterized by a slowdown in global economic activity, growing inflationary pressures, greater exchange rate volatility and less space to promote expansionary policies, make us foresee a new GDP deceleration,” the same that sows doubts about the possibility of continuing to observe improvements in labor indicators, according to the report.

Leidys Becerra, a content producer at Bloomberg Línea, and Vildana Hajric of Bloomberg News, contributed to this report.