Latin American Stock Markets Close Mixed; NYSE Falls As Pessimism Persists

Chile’s IPSA index saw Latin America’s sharpest decline, while fears of a recession and more interest rate hikes continue to weigh on investor sentiment in the US

Brazil's B3 stock exchange in São Paulo
By Bloomberg Línea
January 19, 2023 | 09:52 PM

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

👑 Brazil leads in Latin America:

Latin American markets closed mixed on Thursday, with Brazil’s Ibovespa (IBOV) leading the gains, climbing 0.62%.

After tensions in the markets over the Central Bank’s autonomy, the government’s comments eased concerns and boosted assets. “As the president said, in his government experience he gave full autonomy to the president of the Central Bank, Henrique Meirelles. The president is not going to change his position now, even more so with a law that establishes rules in this regard,” Alexandre Padilha, minister of institutional relations, tweeted.

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Shares of Vale (VALE3) and Petrobras (PETR4) had the strongest gains, while the crisis faced by retail giant Americanas (AMER3), which on Thursday filed for bankruptcy protection, and which will be removed from Brazil’s B2 stock index from Friday, brought more stress to investors.

With a total of 16,300 creditors, the company now admits to having a debt of R$43 billion (previously declared R$40 billion) and 800 million reai in cash, while creditor banks demand the execution of debts, asking even for the sale asset.

📉 A bad day for Chile’s IPSA:

Chile’s IPSA (IPSA) was the Latin American index that fell the most on Thursday. The indicator closed with a loss of 0.42% dragged down by the poor performance of the materials, finance and industrial sectors.

The shares of Sociedad Química y Minera de Chile (SQM/B), Sociedad Inversiones Oro Blanco (OROB) and Compañía Americana de Vapores (VAPORES) led the day’s declines.

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Chile’s ongoing constitutional process to address social inequalities, along with a slowdown in gross domestic product, is weighing on investment and the economic outlook, Fitch Ratings said Thursday in a new report.

According to the ratings agency, the rejection of a proposed new charter in the September 4 referendum “dispelled some risks about a radical change in Chile’s economic model,” but did not end the constitutional process, “extending political and economic uncertainty” at least until a new draft emerges that, according to the planned timetable, would be presented by the end of October 2023 by a Constitutional Council.

The report indicates that, although Congress has agreed that a new Constitution should protect property rights, there are still “lingering doubts, for example, about the role of indigenous groups in the approval of mining projects, water rights and environmental protection”.

🗽On Wall Street:

US stocks fell for a third day as risks from rising interest rates to economic growth and earnings kept a grip on sentiment.

Still, bulls can take some solace in the selloff in equities showing signs of easing, with the S&P 500 ending down 0.8%, less than the 1.6% slide a day earlier. Despite some selling into the close, dip buyers emerged in some big tech names while traders digested the latest Fedspeak.

The Nasdaq Composite (CCMPDL) slipped 0.96%, while the Dow Jones Industrial Average cedió un 0,76%.

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Federal Reserve Governor Lael Brainard, considered a dove, said Thursday rates will need to stay elevated for a period to further cool inflation. She didn’t state a preference for whether the Fed should downshift hikes at its next meeting or what peak rate she envisioned this year.

Her comments came a day after Fed hawks called for boosting rates, with St. Louis Fed President James Bullard penciling in a forecast for a rate range of 5.25% to 5.5% by the end of this year. The current range is 4.25% to 4.5%.

In after-hours trading, Netflix Inc. gained after reporting it added 7.66 million subscribers in the final quarter of 2022, easily topping the 4.5 million average estimate.

During the official session, Procter & Gamble Co. slid after reporting shrinking sales volume. Alcoa Corp. fell after saying aluminum shipments will be weaker than anticipated this year. Discover Financial Services dropped after the credit-card company warned write-off rates may double this year.

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Treasuries stayed lower throughout the session, with the 10-year yield rising 2 basis points, mirroring moves in German bunds after the head of the European Central Bank reaffirmed her aggressive stance. The dollar fell, while the euro and yen gained.

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Adding to the somber mood, the US hit its federal debt limit and the Treasury Department began the use of special measures to avoid defaulting on any payments.

Data were mixed Thursday, with new US home construction declining for a fourth-straight month in December. Applications for US unemployment benefits unexpectedly fell last week, sliding to the lowest level since September and underscoring a strong jobs market. That followed figures a day earlier showing producer prices and retail sales fell, while business equipment production slumped.

“Wage growth has slowed, and broad data is weakening, but Fed officials (at least the ones that have spoken so far) are clearly reluctant to let financial conditions ease,” writes Dennis DeBusschere, of 22V Research. “The hyper focus on anchoring financial conditions will change as inflation continues to move lower/data weakens, but there are not enough data points for the Fed to be comfortable with that call yet.”

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For his part, Mike Loewengart, head of model portfolio construction at Morgan Stanley Global Investment Office, said: “Jobless claims falling for the fourth week in a row is a sign that the labor market is still seemingly able to weather the storm, though the sizable layoffs at blue chips in these past weeks indicate the economic environment is weighing on companies–especially those in the tech sector”.

“When considering that the overall earnings picture continues to be a mixed bag, investors shouldn’t be surprised to see more volatility in the weeks ahead,” he added.

On the currency markets, the Bloomberg Dollar Spot Index fell 0.2%, the euro rose 0.4% to $1.0833, the British pound rose 0.3% to $1.2389 and the Japanese yen rose 0.4% to 128.42 per dollar.

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🔑 The day’s key events:

Oil prices rallied on Thursday as investors continue to bet that reviving demand from China will offset rising US stockpiles.

West Texas Intermediate finished 1.21% higher at $80.44 a barrel after prices swung throughout the day, falling as much as 1.7% in early morning trading. Meanwhile, Brent for March settlement rose to $86.26 a barrel.

The fluctuations came as analysts at JPMorgan Chase & Co. raised their estimate of China’s oil demand growth, saying consumption is on track to hit a record 16 million barrels a day.

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“The reopening is occurring earlier (by a quarter) and faster than we originally expected,” the analysts wrote in a note to clients. “This opens up the possibility that China is poised for a strong economic recovery that will gain momentum in February, following the end of the Lunar New Year vacation.”

🍝For the dinner table debate:

Boosting flexibility at work through possibilities such as the four-day working week could improve productivity and reverse the growing trend of burnout, according to a panel of experts at the World Economic Forum.

The concept of a shorter week has gained traction since the Covid-19 pandemic disrupted workforces’ schedules and gave many a glimpse of how different ways of working could improve their lives.

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A study coordinated by the nonprofit 4 Day Week Global, which involved dozens of companies, showed lower levels of stress and anxiety, and higher levels of efficiency and income, said Adam Grant, an organizational psychologist at the Wharton School of the University of Pennsylvania. People also exercised more and slept better.

“We are rapidly heading toward a burnout society,” said the Netherlands’ Minister of Labor Karien van Gennip. Flexibility is one response to mental health problems. This can include lengthening one’s career so that one can work less for certain years to take care of young children or older parents before resuming the pace of work.

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