LatAm Markets Climb; Wall Street Closes Mixed as Fears of New Rate Rise Abate

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

👑 Argentina’s Merval leads LatAm gains:

Latin American markets closed higher on Monday following the Easter break, led by Argentina’s Merval index, with Mexico’s S&P BMV/IPC (MEXBOL) and Brazil’s Ibovespa (IBOV) also performing strongly, up 1.10% and 1.02% respectively.

The Mexican Stock Exchange suspended operations on multiple occasions as a result of a failure in the dissemination of market data, resuming on a first occasion at 9:57 a.m., and the second at 10:40 a.m. local time.

The Mexican index was boosted during the day by the shares of Grupo Carso (GCARSOA1), Grupo Televisa (TLEVICPO) and Grupo México (GMEXICOB), while the Ibovespa’s gain was driven by the shares of 3R Petroleum Óleo e Gás (RRRP3), Alpargatas (ALPA4) and Locaweb Servicos de Internet (LWSA3).

In Brazil, Investors are still waiting for details of the text of the new fiscal framework. Finance Minister Fernando Haddad stated Monday that he is fine-tuning the details of the wording of the proposal before sending it to Congress and that he expects to finalize the text before his trip to China, together with President Luiz Inácio Lula da Silva, on Tuesday.

In Brasilia, Lula reinforced his support for the new fiscal rule and defended Haddad from criticism of the proposal. Lula said he was “sure” that the framework will be approved by Congress and will bring benefits to public finances and to the country.

🗽On Wall Street:

US stocks eked out a gain in holiday-thinned trading as investors shrugged off fears of one more Federal Reserve interest-rate hike following Friday’s US jobs data. The dollar climbed.

The S&P 500 benchmark rose 0.1% into the close after falling as much as 0.8% intraday. The Nasdaq 100 Index (CCMPDL) clawed its way back from a 1.5% loss to end the day little changed. The tech-heavy benchmark has advanced for the past three weeks as investors snapped up mega-cap stocks in the sector. Yields on the policy-sensitive two-year Treasury hovered around 4%.

The Dow Jones Industrial Average gained 0.30%.

Tech stocks were weak on the prospect of another rate hike, while an Apple Inc. report that personal computer shipments fell sharply added to the slide. Semiconductor names like Micron Technology Inc. helped stem tech losses after rival Samsung Electronics said on Friday that it would cut memory chip production.

Volumes were light for US equities markets with much of Europe shuttered for a holiday. Trading in S&P 500 companies was more than 20% below the 30-day average at this time of day.

On Friday, a solid US hiring report bolstered bets for another Fed rate increase. Traders are upping their wagers on a May rate hike ahead of Wednesday’s report on consumer prices, which is expected to show a 0.4% monthly increase in core CPI.

Ian Lyngen, head of US rate strategy at BMO Capital Markets, said that the March employment numbers provide “no hurdle for the Fed” to issue a 25 basis point hike in May, although upcoming data could impact the decision.

“With the employment landscape remaining surprisingly robust despite the cumulative global policy tightening in place, the Fed’s looming rate decision will almost entirely be contingent on the March CPI report,” he wrote in a note.

Treasury yields climbed, rebounding from session lows, amid a revival in investment-grade credit issuance Monday while Goldman Sachs strategists pointed out there was “significant room to correct higher” as expectations for a near-term Fed rate hike grow. The yield on the 10-year advanced to 3.42%.

Swaps traders have been betting that the Fed will be done with its hiking cycle and lowering its target rate sometime in 2023, but it’s still unclear when the central bank will start to cut rates, according to Matt Diczok, head of fixed-income strategy for Bank of America Corp.

“The market feels fairly certain it’s going to start happening this year, but we need to see that play out more in the inflation data,” he told Bloomberg Television.

Fears of an economic downturn were also top of mind Monday.

“The market’s bad news bears are still being fed a data diet sufficient to prolong their existence. More broadly, a host of economic data — including JOLTS, ADP private payrolls, and service and manufacturing PMIs — have come in softer than expected, increasing the odds of at least a mild recession,” said Saira Malik, chief investment officer at Nuveen.

Lisa Erickson, head of public markets group at US Bank Wealth Management, remains cautious on the chances of a recession.

“What markets are looking for is really a continued trajectory of hopefully some signs of economic deceleration, but not worse than expected, as well as inflation continuing to come down,” Erickson said by phone. “If that continues to happen, you may have a relatively more resilient equity market this week.”

Later this week, traders will be watching earnings and trying to gauge consumer financial health when Wells Fargo & Co., JPMorgan Chase & Co. and Citigroup Inc. kick off reporting for the banking sector Friday.

Members of the C-Suite will look to other companies for clues on how best to communicate during earnings seasons, according to Lori Calvasina at RBC Capital Markets. “Unfortunately the financials are always on the hot seat early, so they do have to take some of the hits early on before the rest of corporate America can adapt.”

Meanwhile, Bank of Japan Governor Kazuo Ueda held his first news conference since taking the new role. The Bank of Japan’s yield curve control and negative interest rates are appropriate amid the current economy, Ueda said, signaling any significant changes to its monetary policy framework may be unlikely for the time being.

In a report Monday, the International Monetary Fund put forward that rates in the US and other industrial countries will revert toward ultra-low levels instead of the 1.5% to 2% real neutral interest rate former US Treasury Secretary Lawrence Summers has suggested.

The dollar rose for the third day while the yen fell. Gold slid, dropping below $2,000 an ounce. Bitcoin defied a selloff in risky assets to climb as much as 4.2% to $29,306.

After China’s military drills over the weekend increased tensions between the US and China, Peter Tchir, head of macro research at Academy Securities Inc. said on Bloomberg Television investors are not paying attention to geopolitical risks.

“Everywhere we look I think there’s this danger, it’s growing and I’m getting a little bit nervous that a lot of investors pay lip service to geopolitical risk but then kind of push it off,” Tchir said. “We’re being a little bit too complacent on the geopolitical front.”

The Bloomberg Dollar Spot Index rose 0.4%, the euro fell 0.4% to $1.0862, the British pound fell 0.3% to $1.2383 and the Japanese yen fell 1.1% to 133.59 per dollar.

🍝 For the dinner table debate:

The Latin American and Caribbean region will reach its maximum number of inhabitants in the year 2056, with a total of 751.9 million people, mainly due to the decline in fertility that has resulted in a decreasing population growth, according to an analysis by the Economic Commission for Latin America and the Caribbean (ECLAC), which also warns that the Covid-19 pandemic interrupted the growth trend in the region in 2020 and 2021.

It is important to note that fertility in the region fell below replacement level and the average age of fertility continued to rise. The total fertility rate (TFR) for Latin America and the Caribbean in 2022 is estimated at 1.85 live births per woman, which has been below replacement level since 2015.

The region’s projected TFR indicates that it will continue to decline, reaching 1.68 in 2100.

The region is experiencing accelerated population aging and thus approaching the end of the demographic bonus period, a period in which a population experiences higher economic growth due to a relatively high ratio of working-age people to dependent population. As a result, the population of people over 60 years of age is expected to surpass that of people under 15 years of age by 2047, reflecting a major demographic transition in the region.

Leidys Becerra, a content producer at Bloomberg Línea, and Carly Wanna and Angel Adegbesan of Bloomberg News, contributed to this report.