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Merval Leads LatAm Gains, Nasdaq Falls at the Opening of a Key Week

US stock markets had a mixed performance ahead of the Fed meeting. In Latin America, the Merval stood out during the day

Analysts relate the performance of the Argentinean market to the impact of the exchange rate.
By Carlos Rodríguez Salcedo (EN) and Bloomberg News
July 25, 2022 | 07:48 pm

This is a roundup of Monday’s stock market results from across the region.

🥇 The Leader:

Most of the main Latin American indexes started out the trading week with positive numbers.

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As it happened several days last week, once again Argentina’s MERVAL had the best performance during the day and closed with a gain of almost 5%.

Shares of YPF (YPFD), Cresud (CRES) and Banco BBVA Argentina (BBAR) were among the best performers of the day.

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Although the increase in commodity prices has benefited regional stock markets, analysts relate the performance of the Argentinean market to the impact of the exchange rate. In the last seven days, the Merval has only fallen once.

Brazilian Ibovespa (IBOV), which closed with a growth of more than 1%, was also in the green.

According to the Focus report, released on Monday by Brazil’s Central Bank, the monetary authority will raise the interest rate next week by 50 basis points, to 13.75%. Regarding inflation, economists surveyed see a maximum of 7.30% this year.

🗽 On Wall Street:

Stocks face a muted Asian open Tuesday as investors digest corporate earnings reports and await the fallout of a looming Federal Reserve interest-rate hike this week.

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Futures edged up for Japan, Australia and Hong Kong, while US contracts fell after a choppy Wall Street session that yielded a modest climb in the S&P 500. Apple Inc. (AAPL) and Google’s Alphabet Inc. (GOOG) weighed on the tech-heavy Nasdaq 100.

Retailer Walmart Inc. (WMT) slid in extended trading on a disappointing profit outlook that could fan worries about corporate prospects as the US economy flirts with a recession amid tightening monetary settings.

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Ten-year Treasury yields rose to 2.8%. Traders are positioning for a wave of debt sales and a widely expected 75 basis points Fed rate rise Wednesday.

A dollar gauge has dropped back to the lowest level since early July. Crude oil hovered around $96 a barrel. Bitcoin (BTC) dropped below $22,000.

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Markets are in something of a holding pattern, awaiting not just the Fed and any signals from Chair Jerome Powell, but also corporate reports from the likes of Apple and Alphabet. Other risks include ongoing disruptions to European gas supplies from Russia as well as China’s Covid curbs and property woes.

For Katerina Simonetti, an adviser at Morgan Stanley Private Wealth Management, the litany of risks exposes the vulnerability of the 6% rebound in global shares from June lows.

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“This is most likely a bear market rally and there are significant risks still facing this market,” she said on Bloomberg Television. “We’re probably going to be seeing a lot of choppiness and potentially some further declines in the market before the year end.”

In contrast, Ed Yardeni, president of Yardeni Research, argues the S&P 500′s plunge last month to a 3,666.77 low likely marked the trough of the 2022 equity rout. He cites the resilience in corporate earnings and the still-healthy outlook for consumers and businesses even as the US economy slows.

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🔑 The Day’s Key Events:

Oil prices rebounded Monday as investors are paying close attention to the supply available in the market and the possibility of an economic slowdown.

This week all eyes will be on the Fed meeting, which is expected to continue with its monetary tightening cycle, which could slow economic growth and impact global oil demand.

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The dollar’s weak start this week also helped boost commodity prices, which became more attractive as the dollar’s value fell.

Some market signs show that investors are rushing to secure supplies, with buyers in Asia paying premiums of more than $20 per barrel, Bloomberg reported.

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📉 At the end of a bad day:

The Peruvian stock market failed to keep pace with the rest of Latin America’s markets and led the losses. The S&P BVL Peru index (SPBLPGPT) fell 0.53% at the close of the day.

The index was dragged down by the performance of the industrial, materials, and basic consumer products sectors.

Shares of Aenza (AENZAC1), Volcan Cia Minera (VOLCABC1) and Sociedad Minera Cerro Verde (CVERDEC1) were among the worst performers.

The Mexican stock market also suffered losses, with the S&P BMV IPC (MEXBOL) dropping 0.13%.

Kimberly-Clark de México (KIMBERA), Alfa (ALFAA), and Industrias Peñoles were among the biggest stock losers.

Grupo México (GMEXICOB) shares fell after President Andres Manuel Lopez Obrador said that the company was no longer in charge of building section 5 of the Mayan Train. The investment was valued at US$752 million.

🍝 For the dinner table debate:

The president of the Inter-American Development Bank, Mauricio Claver-Carone, said on Monday that the organization will not release the $500 million that Argentina was expecting. He questioned whether these funds would be destined for the development of the country, which is going through an economic and financial crisis.

“It is incumbent upon multilateral institutions to adopt the highest standards of financial integrity and transparency and to help their member countries do so, too,” said Claver-Carone in a letter published in the Wall Street Journal.

According to Claver-Carone, “Argentina’s tumultuous financial record uniquely affects the bank’s costs.” He stressed that the IDB must protect its ability “to reliably help all its 26 borrowers.”

“As much as the IDB wants to approve new funds for Argentina, it cannot rubber-stamp requests to do so without prudently ensuring it has a development impact,” said the IDB’s head.