Merval Climbs, Colcap Falls in LatAm while Tesla’s Results Boost Nasdaq

Although shares such as Loma Negra’s (LOMA), YPF’s (YPFD) and Transportadora Gas del Sur’s (TGSU2) were among the best performers of the day, analysts insist on the impact of the exchange rate on the market.

The blue dollar reached an all-time high, while the spot market (Contado con Liquidación), which is used by companies to obtain dollars through the purchase and sale of shares or debt securities, surpassed the ARS$330 barrier.

“Local stocks have been rising strongly throughout the day, directly influenced by the exchange rate,” said Ayelén Romero, an analyst at Rava Bursátil.

S&P BVL/Peru (SPBLPGPT) had the region’s second best performance America driven by consumer staples and industrial sectors, despite the political storm in the country after the Attorney General’s Office opened an investigation into President Pedro Castillo for alleged charges of alleged obstruction to justice.

Brazil’s Ibovespa (IBOV) and the Mexican S&P BMV/IPC (MEXBOL) were also in the green, following the good performance of the international markets.

🗽 On Wall Street:

Stocks rose amid a rally in megacaps as strength in the corporate sector buoyed investor sentiment. Treasuries gained as data pointed to weakness in the US economy.

The S&P 500 posted its biggest three-day gain since May 27, led by tech and consumer discretionary stocks on Thursday. Tesla Inc. topped the leaderboard after its quarterly results beat estimates, with Apple Inc. (AAPL) and Amazon.com Inc. (AMZN) also pushing higher ahead of earnings due next week. Stocks briefly hit session lows in morning trading on news of US President Joe Biden testing positive for Covid.

In post-market trading, Snap Inc. (SNAP) plunged more than 20% after the company reported revenue that missed estimates, citing a slowdown in the ad industry. That weighed on social-media peers Meta Platforms Inc. (META) and Pinterest Inc. (PINS)

Treasury yields dropped, with the 10-year rate sinking 14 basis points to 2.88% after a knee-jerk move higher following the European Central Bank’s greater-than-expected rate hike. Data showing a rise in jobless claims suggested softening in the labor market, while the Philadelphia-area manufacturers’ outlook for business conditions slumped to the lowest since 1979 and the Conference Board’s leading economic index fell more than estimated.

Markets were buffeted in early trading after the ECB hiked rates by 50 basis points, the first increase in 11 years and biggest since 2000. It comes as a brewing political crisis in Italy ramps up the pressure on the ECB to shield the most vulnerable eurozone members from market speculation through a new crisis management tool. The euro initially climbed on the decision before paring those gains against the dollar.

“There’s enough circuit breakers in the market, particularly when you think about the strength of the consumer, the strength of the corporate sector and how well telegraphed this potential recession has been,” Stephen Parker, head of advisory solutions at JPMorgan Private Bank, said on Bloomberg TV. “Because of that, a lot of that pain has already been felt by markets.”

The S&P 500 has climbed about 9% from a multi-year trough in mid-June amid earnings optimism and speculation the Federal Reserve will take a more measured approach to tightening policy. Whether the market has bottomed remains open to debate, but over the past month yields have fallen and rates markets have discarded bets for a full percentage point hike when the Fed meets next week.

Still, sentiment remains fragile amid accelerating inflation and the prospect of a steep downturn in global economies as well as the geopolitical risks, notably in Europe. The resumption of Russian gas exports to the region through Nord Stream could provide some relief for the continent that’s racing to store the fuel before the winter.

🔑 The Day’s Key Events:

Mario Draghi resigned permanently as Italy’s prime minister after three of his coalition partners withdrew their support for him in a confidence vote on Wednesday.

Draghi said he no longer had wide support and had already threatened to resign unless all members of the Unity Government vowed their support.

Following the decision, Italian President Sergio Mattarela reported the dissolution of the Parliament so that early elections could be held on September 25, according to knowledgeable people cited by Bloomberg.

Eurozone’s third-largest economy faces months of political uncertainty as it grapples with record inflation, a threat of recession and the energy crisis following Russia’s invasion of Ukraine.

Italian lawmakers will have to agree on reforms to unlock $205 billion in aid from the European Union, Bloomberg reported.

📉 At the end of a bad day:

The Colombian stock market was the only one to fall among Latin American markets, adversely affected by the performance of oil prices.

Colombia’s Colcap (COLCAP) dropped 0.88% on the back of oil prices and after it resumed trading following yesterday’s holiday. Ecopetrol (ECOPETL) shares, with the highest volume traded, fell more than 3% and are far from the year’s highs reached back in April.

The WTI benchmark lost 3.50%, and was below $100, while Brent, used by Colombia to calculate its accounts, fell 2.90% to 96.35.

The oil market was hammered after signals that China’s demand, the world’s top crude importer, could be hurt by rising cases of Covid-19.

The weaker demand adds to a gradual increase in supply after Libya began restoring production with an increase above 700,000 barrels per day.

Output is forecast to return to 1.2 million barrels per day within a week and 10 days, Bloomberg reported

🍝 For the dinner table debate:

U.S. President Joe Biden tested positive for Covid-19 according to a White House press release.

The 79-year-old president is showing mild symptoms. “In accordance with CDC guidelines, he will be isolated at the White House and will continue to perform all of his duties during this time,” press secretary Karine Jean-Pierre noted in the statement.

Biden is taking Paxlovid, an antiviral drug produced by Pfizer (PFE) and approved by U.S. authorities back in December 2021.

Biden is fully vaccinated and has received two booster doses. He returned this week from a trip to Saudi Arabia and Israel and had traveled to Massachusetts on Wednesday to push for executive actions to tackle climate change.

The White House will provide daily reports on the president’s health, and he will continue working in isolation until he tests negative, the release added.