A roundup of Thursday’s stock market results from across the region
🥇 Chile, Latin America’s Leader:
The Chilean stock exchange once again broke away from the losses in the main Latin American markets and marked three consecutive sessions of gains.
The IPSA (IPSA) index managed to rebound in the last hours of trading after remaining in the red for most of the session, with the financial, utilities and real estate sectors driving the performance of the main Chilean stock market index.
Shares of Colbun (COLBUN), Cencosud (CENCOSHO), Enel Chile (ENELCHIL) and Banco de Crédito e Inversión (BCI) were among the best performers on Thursday.
The Central Bank of Chile raised its interest rate Wednesday by 75 basis points to 9.75%. The decision was adopted unanimously by the monetary authority in a context of strong depreciation of the Chilean peso due to the strengthening of the US dollar.
📉 A bad day for Colombia’s COLCAP:
Practically all Latin America’s stock markets closed with losses. Between the possibility of an economic recession and the fall in the prices of the main raw materials, the region’s markets failed to see gains during the day.
Colombia’s COLCAP index (COLCAP) again accumulated the largest decline among its Latin American peers. The international mood hit the performance of shares such as those of Corficolombiana (CORFICOL), Grupo Argos (GRUPOARG) and the ordinary and preferred shares of Bancolombia (BCOLO).
The stock of Ecopetrol (ECOPETL), which usually has the highest trading volume on the Colombian stock market, fell by more than 5% on Thursday.
The drop in the international price of oil and doubts about the future of the company’s board of directors, once the government of President-elect Gustavo Petro takes office, weighed on the stock’s performance.
Brazil’s Ibovespa (IBOV) fell by 1.80% and the fall of Vale shares (VALE3) weighed the most on the main index of the São Paulo stock exchange, after iron ore fell back to close to $100 per ton in Singapore.
The Mexican stock market was dragged down by the performance of the raw materials, communication services and non-core consumer goods sectors, with the S&P BMV/IPC (MEXBOL) ending the day 1.52% lower.
🗽 On Wall Street:
Stocks closed well off session lows on Thursday as comments from Federal Reserve officials brought some relief to investors worried that a more aggressive pace of rate hikes could trigger a recession.
The S&P 500 almost erased a slide that topped 2% as Fed Governor Christopher Waller and Fed Bank of St. Louis President James Bullard said they would back a 75-basis-point hike in July after a hot inflation print.
El S&P 500 closed down 0.30% and accumulated five sessions with losses, while the Dow Jones Industrials slid 0.46% and the Nasdaq Composite (CCMPDL) remained practically flat.
About $1.9 trillion of options are set to expire Friday, obliging investors to either roll over existing positions or start new ones. The monthly event includes $925 billion of S&P 500-linked contracts and $395 billion of derivatives across single stocks scheduled to run out, Goldman Sachs Group Inc. estimates.
Treasury two-year yields fell as traders shifted their bets away from a full-point hike by the Fed this month. Markets may have gotten a little ahead of themselves in betting on a move of that magnitude, Waller said. The Bloomberg Dollar Spot Index pared gains, but still traded at an all-time high.
Investors got a reality check from the corporate side Thursday, with JPMorgan Chase & Co. temporarily halting buybacks as earnings fell short of estimates, and Morgan Stanley announcing a plunge in investment-banking revenues. Still, the chiefs of both banks said they aren’t steering their firms toward shelter even as they see global events denting the economy.
“People are confused as to where the economy is actually heading,” said Victoria Fernandez, chief market strategist at Crossmark Global Investments. “Are we going into recession? Are we not? Is it going to be a short recession? Is it going to be a deep recession? That’s why we’re seeing so much volatility in the market. People just don’t have a clear direction right now.”
Shrinking the Fed’s $8.9 trillion balance sheet will have an effect over time equivalent to no more than three quarter-point interest-rate hikes, according to a new study by a Fed Bank of Atlanta economist. That suggests the asset reductions will have a relatively modest effect compared to rate hikes to counter inflation.
“We remain skeptical that the Fed can pull off simultaneously normalizing its balance sheet, controlling inflation, and avoiding severe market disruptions,” said Richard Saperstein, chief investment officer at Treasury Partners. “We’re increasingly concerned that investors may be forced to endure more downside volatility in this tricky environment.”
Elsewhere, Bitcoin broke above $20,000, joining gains in tech stocks while investors got more clarity on the bankruptcy of a major digital-assets lender.
Wall Street’s top regulator may use its authority to exempt crypto companies from certain securities laws to help the industry come into compliance, said Securities and Exchange Commission Chair Gary Gensler.
🔑 The Day’s Key Events:
The US dollar remains king and as fears of a possible recession spread, it continues to revalidate its position as a safe haven asset.
With US inflation at a four-decade high and the Federal Reserve likely to raise interest rates further, the currency has gone from strength to strength.
The Bloomberg Dollar Spot, which tracks the dollar against a basket of developed- and emerging-market currencies, rose as much as 0.8% on Thursday, surpassing its March 2020 level.
“Everything is under pressure at the moment and, in that environment, it’s very difficult for currency markets to look beyond the dollar,” Simon Harvey, head of currency analysis at Monex Europe, told Bloomberg.
Fears of a US recession also weighed on oil prices, which fell to pre-war levels in Ukraine, and the benchmark WTI and Brent recovered from session lows but still remain below $100 per barrel.
🍝 For the Dinner Table Debate:
Italy is experiencing hours of uncertainty as it tries to defuse a political crisis that led to the resignation of Prime Minister Mario Draghi, which was later rejected by Italian President Sergio Matarella.
Draghi resigned after the ruling coalition split following a boycott of a confidence vote on the government, Bloomberg reported.
The Five Star Movement, led by former prime minister Giuseppe Conte, walked out of a Senate vote that sought to approve an aid package for businesses and households hit by high energy prices.
Conte has complained that the government is not doing enough to protect families from the crisis.
After the failed vote, Draghi tendered his resignation but Matarella rejected it and asked him to address parliament to deal with the situation, according to a statement from his office seen by Bloomberg.
-- Carlos Rodríguez Salcedo, a content producer for Bloomberg Línea, and Rita Nazareth of Bloomberg News, contributed to this report
