A roundup of Wednesday’s stock market results from across the Americas
🗽On Wall Street:
US stocks ended lower as fresh concerns about the health of American regional lenders dragged down bank shares, even as big-tech earnings helped support broader sentiment.
The S&P 500 retreated 0.4% as First Republic Bank’s woes deepened Wednesday. The US regional bank plunged 30% in another volatile session after it was said to face potential curbs on borrowing from the Federal Reserve. Treasuries fell after an auction, with US lawmakers expected to vote on a debt ceiling bill in the early evening. Meanwhile, PacWest Bancorp offered a glimmer of hope that First Republic doesn’t portend trouble for the broader sector. Its shares rose 7.5% amid signs of recovery in its deposit levels.
The losses came as the tech-heavy Nasdaq 100 rose 0.6% after Google parent Alphabet Inc. (GOOGL) and Microsoft Corp. (MSFT) both beat first-quarter earnings expectations late on Tuesday. Alphabet ended trading little changed, while Microsoft rose 7.2%, even as the UK separately vetoed a takeover of Activision Blizzard Inc. Tech stocks were also higher postmarket Wednesday following an earnings beat by Meta Platforms Inc.
A run on deposits at First Republic has raised questions about the effect of the Federal Reserve’s aggressive rate hikes on US lenders and what the central bank can do to stop a bank crisis from spreading. Some market participants have speculated the tightening cycle may end sooner than expected, though inflation remains high. The Fed’s preferred measure of inflation, the so-called PCE deflator, is due Friday.
“Up to this point Fed officials have taken substantial comfort from indications that acute [bank] stress was contained and there was no immediate sudden stop to bank credit,” Krishna Guha, Evercore ISI’s head of central bank strategy, wrote. “That is a bit less firmly locked now, and we cannot rule out the possibility developments around First Republic could unfold in a manner that would lead the FOMC to skip [raising rates in] May while signaling a hike in June.”
In Europe, the regional stock benchmark declined 0.8% amid disappointing earnings. Software producer Dassault Systemes sank after missing revenue estimates. Dutch chip-tool maker ASM International slumped after offering a tepid outlook for the rest of the year. Roche Holding AG retreated even as its first-quarter sales exceeded expectations. Meanwhile, beats from Standard Chartered Plc and Sweden’s SEB AB failed to bolster sentiment.
“The markets are very much focused on some of the earnings story, but possibly overlooking the weight of economic deceleration that is playing through right now, particularly in the United States,” John Woods, Asia Pacific chief investment officer at Credit Suisse Group AG, said on Bloomberg Television. “I’m looking at a whole range of technical signals, which seem to be suggesting a risk-off environment.”
Looking ahead, Tony Welch of SignatureFD said he expects tech earnings to continue to shine.
“We always have to think about what the market has priced relative to expectations,” he said. “Throughout the first quarter of the year, the market was starting to price in, ‘Okay, things aren’t as bad for big tech as what we thought they were. They’re going to be able to preserve profit margins better than we thought they were.’ I suspect you’re going to see a decent beat rate among those names.”
Elsewhere in markets, oil fell, gold slid, and Bitcoin pared an advance.
The Bloomberg Dollar Spot Index fell 0.2%, the euro rose 0.6% to $1.1035, the British pound rose 0.4% to $1.2463 and the Japanese yen was little changed at 133.64 per dollar.
🌎 LatAm markets close mixed:
The majority of the region’s markets closed lower, but Argentina’s Merval (MERVAL) and Chile’s IPSA closed higher, with the Merval gaining 0.57% and the IPSA 0.49%.
Argentina will stop paying in dollars for imports from China and will switch to yuan instead. The activation of the swap will allow the replacement of payments for $1.04 billion in May, which will imply a relief for the Central Bank’s depleted reserves.
The measure was announced this Wednesday by the Minister of Economy, Sergio Massa, and the president of the BCRA, Miguel Pesce, together with the Chinese ambassador in the country, Zou Xiaoli, and representatives of Chinese companies in Argentina. The decision, according to the Treasury Palace, will also mean that as from May, $790 million will no longer be imported in that currency but in yuan, taking advantage of the activation of the swap with China.
Colombia’s COLCAP index (COLCAP) dropped 1.01%, the region’s sharpest losses, dragged down by the finane, energy and raw materials sectors.
President Gustavo Petro’s cabinet reshuffle after a series of legislative setbacks took markets by surprise. The Colombian peso weakened during Wednesday’s trading, ranking at the end of the session as one of the region’s biggest losers, while Colombian dollar bonds hit new daily lows.
Bloomberg reported that bonds maturing in 2041 reached their lowest level in nearly a month. They plunged to session lows, falling 2.5 cents to 79 cents per dollar.
In total, seven government ministers have left the government, including finance minister José Antonio Ocampo. For now, the new head of the portfolio, Ricardo Bonilla, said he will maintain the stability of the economy.
“The market is waiting for the new minister to give a press conference confirming the commitment to the country’s fiscal sustainability, the independence of the Bank of the Republic and a gradual, safe and sustainable energy transition,” Casa de Bolsa’s director of analysis and strategy, Juan David Ballén, told Bloomberg Línea.
Colombia’s first leftist president seeks to reform the nation’s economic model by boosting workers’ rights and increasing the state’s role in providing health care and pensions. But his majority coalition has fractured and he faces strong opposition, including from allies in Congress and members of his own cabinet.
🍝 For the dinner table debate:
China reached a new milestone in its quest to reduce its dependence on the US dollar: its currency, the yuan, became the most widely used for cross-border payments in the country for the first time in March.
The proportion of remittances rose to 48% from almost 0 in 2010, according to Bloomberg Intelligence based on data from the State Administration of Foreign Exchange. In contrast, the dollar figure fell from 83% in 2010 to 47% in March.
The calculations are derived from the volume of all types of transactions, including securities trading through links between mainland China and Hong Kong’s capital markets. This, however, does not represent transactions used by the rest of the world: the yuan’s share of global payments was little changed at 2.3% in March, according to SWIFT.
“The internationalization of the yuan is accelerating because other countries are looking for an alternative payment currency to diversify risks and because the Fed’s credibility is not as good as it used to be,” said Chris Leung, an economist at DBS Bank. “But at the same time we are still talking about a long way from dollar dominance, and the yuan’s share of global payments could always be small.”
Leidys Becerra, a content producer at Bloomberg Línea, and Cristin Flanagan and Peyton Forte of Bloomberg News, contributed to this report.
