A roundup of Friday’s stock market results from across the Americas
🌎 Chile’s IPSA hits new high:
Latin American stock markets, in contrast to Wall Street, closed the week with a majority of gains, starting with Chile’s selective index (IPSA), which rose 2.59% at the close of Friday’s session, to accumulate gains of 2.69% in the last five days, according to Bloomberg tracking.
But not only that: Chile’s Ipsa closed at a new all-time high and thus set a new record on July 7, after ending the day at 5,942.20 points (2.59% appreciation in the session). The Chilean stock market has benefited from economic data that support the expectations of an early cut in the reference interest rate by the Central Bank of Chile: first was the economic contraction for the month of May, followed this Friday by the inflation rate, which showed a fall for the second time this year 2023.
Markets did not anticipate a monthly drop in the consumer price index (CPI), which fell 0.2% in June. This economic data strengthened bets that financial and monetary conditions in the Andean country will soon ease. In the session, the best performing sectors of the Ipsa were materials (5.39%), energy (2.92%) and finance (2.38%); and the shares that rose the most at the close were those of Sociedad Química y Minera de Chile (SQM), with an increase of 6.94%, and Banco BCI (BCI), with an increase of 4.65%.
Lima Stock Exchange (SPBLPGPT) rose by 1.09%. In the last five days the Peruvian stock market saw an increase of 0.85% in its main index, thus outperforming the S&P/BMV IPC Mexico (MEXBOL) which posted a rise of 0.71% in the same period.
On Friday, the sectors that boosted the LSE were finance (1.54%) and materials (1.40%). Likewise, the best performing shares were those of Alicorp (ALICORC1), with an increase of 3.23%, and Buenaventura (BVN), with an increase of 3.01% at the close of the day.
Among the regional stock exchanges, only Argentina’s Merval (MERVAL) fell 0.63% during the week, despite the fact that on Friday it rose 1.44%. Ayelen Romero, account executive at Rava Bursátil, highlights that the tension in the Argentinean market was transferred to the last stock market days “due to the fact that there were increases in the country risk and decreases in the Merval in its peso and dollar terms”.
🗽On Wall Street:
US stocks slumped after a spate of jobs reports tamped down speculation the Federal Reserve would leave interest rates unchanged later this month.
The S&P 500 fell 1.2% over the shortened holiday week while the Nasdaq 100 slid 0.9%. Yield on the two-year Treasury drifted down to 4.94% on Friday as investors digested government jobs data that fell short of estimates but brought signs that wage inflation remained a threat to the Fed’s fight against price gains.
Overall, the data showed signs of cracks in the American labor market, a day after a private payrolls report suggested resilience that may warrant several more rate hikes. Traders are betting on at least one more increase this year though they have not fully priced in a second hike.
Chicago Fed President Austan Goolsbee left the door open for more data to sway officials ahead the central bank’s next meeting. “We’re getting to a more sustainable pace, which is what we need to do for inflation,” Goolsbee said of Friday jobs data in an interview on CNBC.
Traders will be closely watching next week’s consumer price print. Bloomberg economists are expecting the headline number to fall 3.1% though they don’t see that stopping the Fed on July 26. Reports from the big banks including Citigroup Inc. and JPMorgan Chase & Co. may also set the tone for second quarter earnings.
Friday’s payroll numbers were not yet weak enough to stop the central bank’s tightening, according to Seema Shah, chief global strategist at Principal Asset Management.
“Jobs growth has slowed but remains too strong to justify an extended Fed pause,” she said. “More significantly, with average hourly earnings surprising to the upside, wage pressures are still too strong. Today’s report will give the Fed little reason to hold off from hiking at the July meeting.”
June’s 0.4% wage growth indicates businesses are still desperate to draw in and keep workers, according to Jeffrey Roach, chief economist at LPL Financial.
“The latest jobs report all but ensures the Fed will increase rates later this month,” he wrote.
Stocks have been losing ground in July after a strong first half of the year as hawkishness from central banks from the US to the UK dampens hopes of a soft landing for the global economy. Technology shares have been one of the hottest trades, driven by the buzz around AI, but Bank of America Corp. strategists said investors who piled into the sector risk being caught off-guard in the selloff sparked by rate hikes.
“We say ‘sell the last hike’ will hit tech hardest,” the BofA team led by Michael Hartnett wrote in a note. But if excitement over AI continues, they said the “baby bubble” that currently exists in a handful of Big Tech shares will mature into a larger one in the second half.
Dallas Fed President Lorie Logan voiced her concerns on Thursday that inflation was still running too hot and more tightening was needed. Policymakers elsewhere share that view, with European Central Bank President Christine Lagarde saying there is still “work to do” to bring inflation under control.
Gold advanced Friday while crude futures traded higher after the Biden administration said its purchasing 6 million more barrels of oil for strategic reserves.
The Bloomberg Dollar Spot Index fell 0.7%, the euro rose 0.7% to $1.0967, the British pound rose 0.7% to $1.2834 and the Japanese yen rose 1.4% to 142.10 per dollar.
🍝 For the dinner table debate:
Which Latin American countries maintained a higher country risk during the first half of 2023? According to the Emerging Markets Bond Index (EMBI) prepared by the US bank JPMorgan Chase, which shows the difference in yields of emerging market bonds compared to US Treasury bonds, Argentina remains the nation with the highest country risk in the region with a compression of 6.15% in the first six months of the year, after scoring a score of 2,061. However, Argentina’s bond maturing in 2030 - the most representative for its debt - had a price improvement of 23.3% in the six-month period under study.
Meanwhile, one of the countries that saw a greater increase in its country risk in the first half of the year was Bolivia, which registered a 97.5% positive variation in the month under study. Bolivia ended June 30 with a country risk of 1,112 points, well above the 563 points recorded at the end of 2022.
Along the same lines, Ecuador was the third riskiest country in the region in the first half of 2023, with an increase of 53.7% in the period under study. If an Ecuadorian bond cost $64.37 per sheet at the beginning of the year, as of June 30 that cost fell to $48.57.
Paola Villar S., a content producer at Bloomberg Línea, and Isabelle Lee and Vildana Hajric of Bloomberg News, contributed to this story.
