Mexico and Peru Markets Lead LatAm Gains; US Equity-Index Futures Fall

Argentina’s Merval and Brazil’s Ibovespa both posted losses on Monday as the NYSE remained closed for the Independence Day holiday

Mexico's stock exchange (BMV) Photographer: Susana Gonzalez/Bloomberg
By Bloomberg Línea and Bloomberg News
July 04, 2022 | 07:15 PM

A roundup of Monday’s stock market results from across the region

👑 Latin America’s Leaders:

Mexico’s S&P BMV/IPC (MEXBOL) and the Peruvian stock exchange (SPBLPGPT) were the best performing stock markets in Latin America on Monday, with the former gaining 0.61%, thanks to the performance of the materials, health and basic consumer goods sectors.

GRUMA SA (GRUMAB) and Grupo Bimbo (BIMBOA) shares saw the sharpest gains.

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The Peruvian index rose 0.03% following a boost from the financial, industrial and materials sectors. Shares of Credicorp LTD (BAP), Cementos Pacasmayo (CPACASC1), Ferreycorp SA (FERREYC1) were among the session’s top performers.

📉 A Bad Day:

Argentina’s Merval (MERVAL) and Brazil’s Ibovespa (IBOV) had the worst performance in the region, the former closing with a drop of 1.02%, while the Brazilian index dropped 0.35%.

In Argentina, the departure of Economy Minister Martín Guzmán on Saturday and the arrival of Silvina Batakis to the portfolio appears to have impacted markets on Monday, with most shares falling, but on a day marked by a low trading volume due to the Independence Day holiday in the US.

The Ibovespa was affected by the performance of the communication services, utilities and non-basic consumer products sectors.

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The Colombian stock exchange (COLCAP) remained closed due to a holiday.

🗽 On Wall Street:

US equity-index futures and European bonds fell as investors worried about the twin threats of dwindling economic growth and stubborn inflation.

Contracts on the S&P 500 and Nasdaq 100 dropped at least 0.3% each after the underlying indexes capped their 11th decline in 13 weeks. European stocks rose for the first time in four days as dip-buyers emerged. The dollar erased its losses. Italian bonds tumbled with investors watching domestic political tensions. US markets were closed for Independence Day holiday.

World stocks and bonds are in the grip of the worst selloff in at least three decades as increasing chances of a US -- or even global -- recession are spooking investors. At the same time, sticky inflation has left little room for the Federal Reserve to apply brakes on monetary tightening. This toxic combination presents markets a trading challenge not seen since the late 1970s.

“The market has begun to worry more about economic growth than just liquidity withdrawal and inflation,” Stephen Innes, managing partner at SPI Asset Management, wrote in a note. “Unlike previous downturns, inflation is much higher and unemployment is much lower. These dynamics delay any potential dovish central-bank pivot despite the rapid shift in front-end rate expectations over the past week.”

The MSCI All-Country World Index, the global benchmark, plunged 21% in the first half, the worst year-to-date losses since at least 1988. Similarly, the 14% loss in the Bloomberg Global Aggregate Index of investment-grade debt was its worst performance since 1990, the earliest date for which records are available.

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The dollar was little changed Monday, after trading lower for most of the European session. US President Joe Biden may announce the rolling back of some tariffs on Chinese imports as soon as this week, Dow Jones reported.

In Europe, the Stoxx 600 benchmark climbed 0.5%. Energy, commodity and health-care stocks were the biggest gainers.

Italian bonds slid as investors awaited a meeting between Prime Minister Mario Draghi and Five Star leader Giuseppe Conte to settle weeks of political tensions. The nation’s 10-year yield jumped 15 basis points to 3.24%, widening its spread over German bunds to 1.91 percentage points.

In China, officials were trying to repel a Covid flareup that could buffet an economically significant region. That’s another test of Beijing’s strategy of trying to eliminate the pathogen with mass testing and disruptive lockdowns. A gauge of Hong Kong-traded Chinese stocks fell to the lowest level since June 24.

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Separately, developer Shimao Group Holdings Ltd. said it didn’t pay a $1 billion note that matured Sunday, among the biggest dollar-payment failures so far this year in China.

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Bitcoin hovered above the $19,500 level.

🔑 The Day’s Key Movements:

Oil prices rose on Monday as investors weighed market concerns about a global slowdown that could cut demand. Over the past month, crude oil has been hit by supply disruptions, with protests that have disrupted exports in Libya and a workers’ strike in Norway.

West Texas Intermediate futures for August delivery rose above $110 per barrel, erasing earlier losses. Meanwhile, Brent for September delivery rose 1.7% to $113.50 per barrel. Trading volumes were subdued due to the US holiday.

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“Risk-off sentiment and a stronger dollar have helped lift prices,” said Giovanni Staunovo, commodities analyst at UBS Group AG. A strike in Norway also added to supply problems, he added.

🍝 For the Dinner Table Debate:

Movements in Bitcoin (XBT) suggest that the cryptocurrency has bottomed out, but this time it could be different. It’s an exercise that is done whenever an asset is mired in a prolonged and deep decline: people look at charts, review indicators and try to figure out when it might find a floor. In the case of bitcoin, there’s a lot of this going on right now, including technical signals that in the past have suggested the cryptocurrency has touched bottom.

Glassnode analysts monitor a range of indicators, from instances where bitcoin falls below a moving average to when it closes below the so-called break-even price measure, which reflects a market price that matches the value paid for the coins minus the value ultimately realized. What they are seeing now is that many of these measures show similar blips, something that rarely happens.

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In the past five years, analysts say, there have only been six other similar stretches, some of which have coincided with bear market lows, such as in November 2018 and March 2020. But could this time be different?

“Unlike 2018, when demand for bitcoin did fall during a price crash, there are no signs today that adoption is slowing,” said Brett Munster of Blockforce Capital.

“Despite the recent price drop, bitcoin’s fundamentals are arguably stronger now than at any time in its history.”

-- Leidys Becerra, a content producer for Bloomberg Línea, and Srinivasan Sivabalan of Bloomberg News, contributed to this report