LatAm, US Markets Begin August With Losses

The biggest losses were in Argentina’s Merval (MERVAL), after the impact of the exchange rate led the index measured in Argentine pesos to close July with an increase of almost 40%.

August began with a 4% decline for the Merval, with shares of Ternium Argentina (TXAR), Transportadora de Gas del Sur (TGSU2) and YPF (YPFD) among the biggest losers in the session.

“The beginning of August came with a strong correction in the local market shares and the drop in the financial dollar quotations is also maintained. There are also expectations about the economic direction that the new Minister of Economy, Development and Agriculture, Sergio Massa, may take”, said Fernando Starapoli, an analyst at Rava Bursátil.

Brazil’s Ibovespa (IBOV) fell by almost 1%, following the bearish tone on Wall Street. Domestically, investors are awaiting the Central Bank’s interest rate decision on Wednesday, with expectations of a rise of half a percentage point to 13.75%.

Mexico’s stock market also closed lower, with the S&P/BMV IPC (MEXBOL) falling 1.58%, dragged down by the performance of the health care, materials and finance sectors.

🗽 On Wall Street:

The S&P 500 fell 0.28% on Monday, the Nasdaq 100 fell 0.1% and the Dow Jones Industrial dropped 0.14% and the Nasdaq Composite (CCMPDL) slipped 0.18% as US manufacturing data showed weakening output

“US stocks have had a lackluster start to the month, with plenty of reminders of how quickly the global economy is slowing and as risks to the outlook continue to mount,” said Edward Moya, an analyst at Oanda.

The nervousness comes in a half-year when stock markets will face their riskiest months of the year. August and September average declines of 0.6% and 0.5%, respectively, over the past 25 years, according to Bloomberg.

US House Speaker Nancy Pelosi is expected to visit Taiwan on Tuesday. She would become the highest-ranking American politician to visit the island in 25 years. China views Taiwan as its territory and has warned of consequences if the trip takes place.

The trip may end up being another “short-term dislocation” for markets but “it’s always concerning when they do happen,” Ayako Yoshioka, senior portfolio consultant at Wealth Enhancement Group, said on Bloomberg Radio.

Treasuries climbed, lowering the 10-year yield to about 2.54%. Bonds globally have pushed higher in the wake of data suggesting factory output is shrinking or cooling in key economies alongside moderating input prices.

Investors are also keeping a wary eye out for more potentially hawkish comments from Federal Reserve officials about the need for higher interest rates to restrain elevated inflation.

Expectations for how aggressive the Fed must be have receded because of recession risk, so any shift in those perceptions could stoke market volatility.

“You’re going to continue to see a lot of the Fed-speak continue to be fairly hawkish,” Larry Adam, chief investment officer at the private client group at Raymond James Financial Inc., said on Bloomberg Television. But he expects easing inflationary pressures to allow the Fed to be “a little bit more accommodative as we head into the back half of the year.”

Coming up this week are results from Airbnb, Alibaba and BP.

🔑 The Day’s Key Events:

The prospect of a demand slowdown has sapped oil, leaving it around $94 a barrel. Oilseed and grain futures fell after the first grain ship since Russia’s invasion left Ukraine, heralding some relief for a tight global food market.

WTI and Brent dropped by 4.80% and 3.79%, respectively, as crude prices were dampened by concerns over more lockdowns in China to curb Covid-19.

Over the weekend, data showed that China’s manufacturing activity unexpectedly contracted in July, reversing an earlier economic boost from the impact of virus containment, Bloomberg reported.

This scenario will continue to “negatively affect oil demand until at least November this year, when a strategic shift in Covid policy may be announced,” Harry Altham, energy analyst for EMEA and Asia at StoneX Group, told Bloomberg.

Concerns that an economic slowdown will hit crude demand also intensified with manufacturing data from Europe. The manufacturing PMI contracted and a pullback was confirmed for the all-region figure, following an initial estimate delivered on July 22.

🍝 For the Dinner Table Debate:

Investors are not optimistic that Elon Musk will end up owning Twitter Inc. (TWTR) after the court battle it has initiated after the billionaire entrepreneur failed to fulfill the agreement with which he promised to buy the social network for around $44 billion.

That is one of the conclusions of the most recent MLIV Pulse poll conducted by Bloomberg among investors. Of the 1,562 people consulted, 75% believe that Musk will not end up owning the company.

What they do believe will happen, according to the poll, is that Musk will sell more of his shares in Tesla (TSLA), even though he would no longer need to do so to finance the purchase of Twitter. In April, Musk sold $8.5 billion in shares of the electric car maker to strengthen his proposal to acquire the social network.

The survey also shows that a third of those polled estimate that the tycoon will reach a deal with the social network company for more than the $1 billion stipulated in the event the deal does not materialize.

In addition, 27% expect the court to order Elon Musk to pay the $1 billion penalty for breaking the deal. The survey included investment portfolio managers and retail investors.

-- Carlos Rodríguez Salcedo, a content producer at Bloomberg Línea, and Sunil Jagtiani of Bloomberg News, contributed to this report.