LatAm Markets Close Mixed; Hawkish Fed Tumbles US Stocks

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

👑 Colombia’s COLCAP leads in Latin America:

Only Colombia’s (COLCAP) and Argentina’s MERVAL (MERVAL) closed with gains among Latin American markets on Thursday. The COLCAP gained 1.31%, buoyed by the shares of Grupo Nutresa (NUTRESA), Ecopetrol (ECOPETL) and Grupo de Inversiones Suramericana (GRUPOSUR), which saw the strongest climbs.

There are only wo days left in the period for receiving acceptances for IHC Capital Holding’s takeover bid for Grupo Nutresa and the Gilinskis are willing to sell part of their stake.

Sources close to the Gilinski family confirmed to Bloomberg Línea that the banker will sell between 5% and 9.9% of Grupo Nutresa shares to IHC Arabs.

In addition, legal action will be launched against GEA’s administrators if the takeover bid is declared void. It should be recalled that the Arabs are considering buying at least 25% of the company. Their main objective is to obtain 31.25% of the company and they are offering $15 per share.

On the other hand, the legislative process of the most important economic project of Colombian President Gustavo Petro’s government concluded on Thursday: the tax reform. With 122 votes in favor and 27 against, Congress approved the plan, which now passes to the president for him to sign it into law.

This reform aims to raise $20 billion and, as stated by the Ministry of Finance, in addition to generating resources for social, economic and environmental justice, the government’s flagship project, and which represents an advance not only in taxation but also in the financing of the country’s public spending.

The MERVAL gained 0.75%, boosted by the shares of Empresa Distribuidora de Energía Norte (EDN), Transener (TRAN) and Banco BBVA Argentina (BBAR).

The Argentine government on Wednesday had its budget approved for next year after unanimous approval in the Senate, with 37 votes in favor, and thanks to cross-party support.

📉 A bad day for Peru’s markets:

Peru’s S&P/BVL (SPBLPGPT) saw the sharpest losses, followed by Chile’s IPSA (IPSA) and Brazil’s Ibovespa (IBOV).Peru’s market dropped 1.26%, with shares of Credicorp (BAP), Minsur SA (MINSURI1) and Volcan Compañía Minera (VOLCABC1) suffering the sharpest losses.

Chile’s IPSA dropped 1.11%, with the shares of CAP SA (CAP), Sociedad Química y Minera de Chile (SQM/B) and Falabella (FALAB) seeing the sharpest losses.

As for the Brazilian stock market, the Ibovespa fell 0.49%, with assets pressured by new criticisms from President-elect Luiz Inácio Lula da Silva regarding compliance with the spending ceiling to the detriment of the allocation of resources to the social area.

“To comply with the tax ceiling, it is generally necessary to dismantle social policies and not interfere with the financial market. Will the dollar rise and the stock market fall? Patience. But the dollar does not go up or the stock market goes down because of serious people, but because of speculators.” said the president-elect in Egypt at the COP27 Summit.

The statements come a day after vice president-elect Geraldo Alckmin delivered to Congress the text with the proposed amendment to the constitution of the transition, which provides for almost 200 billion reais ($36.8 billion), outside the spending ceiling for 2023, indicating that “socio-environmental projects or those related to climate change” should not be subject to the ceiling permanently.

🗽 On Wall Street:

US stocks and Treasuries slumped as Federal Reserve officials hammered home their resolve to remain persistent in their fight against inflation and warned of more pain to come.

The S&P 500 dropped 0.31% and the tech-heavy Nasdaq Composite (CCMPDL) 0.35%, while the Dow Jones Industrial Average dropped 0.02%, all closing lower for the second straight session.

Commodities from oil to copper fell while the dollar snapped a two-day drop.

US 10-year Treasury yields climbed after St. Louis Fed President James Bullard said policy makers should increase interest rates to at least 5% to 5.25% to curb inflation. He also warned of further financial stress ahead.

With inflation only starting to ease and a gauge of US retail sales increasing at the fastest pace in eight months, Fed speakers in recent days have emphasized that they need to go further to extinguish prices pressures. Bullard’s comments came a day after San Francisco Fed President Mary Daly said a pause in rate hikes was “off the table.” Their hawkish tone was echoed by Minneapolis Fed President Neel Kashkari on Thursday afternoon.

“The takeaway is that the Fed is following the same playbook they have now for a long time,” said Johan Grahn, head of ETFs at Allianz Investment Management. Fed Chair Jerome Powell persistently reiterates his hawkish stance to keep markets at bay, so the rally after softer inflation data was not what central bank officials wanted to see, he said.

“It’s a game of chicken between basically the economy, the markets and the Fed right now,” Grahn said. “And most people, I think, would be wise to believe that the Fed might win in the end.”

On Thursday, fresh data showing weekly jobless claims came in below the forecast further underscored the strength of the labor market. US mortgage rates posting their biggest weekly decline since 1981 briefly improved sentiment, even though Freddie Mac’s chief economist said there’s a long road ahead for the housing market.

A handful of earnings reports trickled in after markets closed on Thursday. Applied Materials Inc., the biggest maker of chip-manufacturing equipment, gave a better-than-feared sales forecast for the current period. Gap Inc., meanwhile, jumped after its quarterly sales and profit surpassed Wall Street’s estimates.

Meanwhile, European Central Bank policy makers are said to be mulling a smaller 50 basis-point rate hike next month, signaling their concern for the economy and pushing the euro lower.

The pound dropped after Chancellor Jeremy Hunt outlined a £55 billion ($65 billion) package of tax rises and spending cuts even as the economy slid into recession. Gilt yields rose.

On the currency markets, the Bloomberg Dollar Spot Index rose 0.4%, the euro fell 0.3% to $1.0368, the British pound fell 0.4% to $1.1863 and the Japanese yen fell 0.5% to 140.19 per dollar.

🔑 The day’s key events:

Commodities, from oil to copper, fell on Thursday. Crude oil continued Wednesday’s losses as demand concerns resurface.

West Texas Intermediate fell 4.62% to $81.64. Meanwhile, Brent closed the day down 3.04% at $90.04. During the day, Brent futures traded below $90 for the first time since early October.

China, the world’s largest oil importer, continues to cause fears about investors, who believe that the increase in Covid-19 cases could affect citizens’ consumption. “Concerns about China is one of the main areas of focus at the moment, where Covid cases are on the rise again and investors fear that more blockages are likely,” said Fawad Razaqzada, market analyst at City Index.

Adding to the headwinds, JPMorgan Chase & Co. (JPM) projected that the U.S. will enter a “mild” recession next year due to interest rate hikes. In addition, traders continue to expect the full impact of sanctions on Russian oil and a possible global economic slowdown.

🍝 For the dinner table debate:

Sam Bankman-Fried decided to tweet his side of the story of the crisis in the crypto ecosystem that he helped create. On Thursday he added 18 messages to a long thread he started at the beginning of the week. Posted at sporadic intervals, the messages have combined apologies for the failures with his perspective on what went wrong with FTX, the crypto exchange he founded and ran.

Early posts included the words “What Happened,” followed by hints that he would make disclosures in the future.

In the most recent posts he assured that he would do his best to save clients’ money, discussed how difficult it is to regulate the crypto ecosystem, and boasted about how he was “on the cover of every magazine” before the FTX crash.

“We became overconfident and stopped being careful,” he said.

He concluded the most recent tweets in the thread with, “It’s what you do that matters - it’s *really* doing good or evil, not just *talking* about doing good or *using ESG language*. Anyway, none of that matters now. What matters is doing the best you can. And do everything I can for FTX customers.”

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