Mexico Leads Latin American Market Gains; NYSE Closes Higher

Only Chile’s stock market closed lower in Latin America on Wednesday, while the NYSE gained following the release of key economic data

Operaciones en Bolsa Mexicana de Valores
By Bloomberg Línea
January 04, 2023 | 08:45 PM

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

👑 Mexico’s BMV leads in Latin America:

Latin American stock markets closed with gains on Wednesday, with the exception of Chile’s IPSA. Mexico’s S&P/BMV IPC (MEXBOL)) finished with the largest gain among its peers in the region.

The Mexican index closed up 2.26%, driven by the performance of the materials, real estate and finance sectors. Shares of Controladora Vuela (VOLARA), Operadora de Sites Mexicanos (SITES1), Industrias Penoles (PE&OLES*) were among those that led the day’s gains.

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The stock market’s increase is the result of three elements, Actinver’s associate director in Equity Research, Valentin Mendoza, told Bloomberg Línea.

“The first has to do with an improvement in investor sentiment underpinned by the inflation data released in Europe, both yesterday and today, which confirms that pressures are easing and the effect this could have on monetary policy,” he said.

The second element is the attractive levels of the Mexican stock market.

According to the strategist, the IPC of the Mexican Stock Exchange has the seventh lowest valuation of the 30 indexes in the world despite the fact that Mexico has greater stability compared to its Latin American peers in terms of political risks. “Investors are looking to turn their investment portfolios more defensive considering that weighted earnings come from defensive names,” said Mendoza.

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The third element is opportunity purchases after the last week of the year, despite low liquidity in the Mexican stock market, registered a 3.13% correction, according to Bloomberg data. “Most of the companies that led today’s gains are characterized by considerable backwardation and attractive valuations,” Signum Research analyst Alain Jaimes said.

📉 A bad day for Chile’s IPSA:

Chile’s Ipsa (IPSA) was the only indicator in the region to fall during the day. The Chilean stock market closed with a loss of 0.88%, dragged down by the performance of the real estate, energy and services sectors.

The shares of Parque Arauco (PARAUCO), Cencosud Shopping (CENCOSHO), Empresas Copec (COPEC) dragged down the performance of the Chilean index.

Chilean opposition deputies are seeking to remove two members of President Gabriel Boric’s cabinet, raising political tensions as his administration seeks to advance key economic reforms.

The right-wing Republican Party filed a “constitutional accusation” against Social Development Minister Giorgio Jackson, alleging that Boric’s former ally committed negligence and abuse of power.

The opposition parties also announced a separate accusation against the Minister of Justice, Marcela Ríos. In this case, they allege irregularities related to the presidential pardons issued last week.

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🗽On Wall Street:

US stocks ended Wednesday’s session with gains as traders weighed the concerns Federal Reserve officials voiced during their last policy meeting against key data showing the economy is slowing. Treasury yields slipped.

The S&P 500 snapped two days of losses, but not without some drama following the release of minutes from the Federal Open Market Committee’s December meeting. They showed officials cautioning that an “unwarranted” loosening of financial conditions — a cross-asset measure of stress among markets — would complicate efforts to reach their inflation target. Policy makers were also concerned that inflation will remain entrenched if the labor market stays resilient.

The S&P 500 and the Nasdaq Composite (CCMPDL) climbed 0.75% and 0.69%, while the Dow Jones Industrial Average gained 0.40%.

The 10-year Treasury yield ended the day at 3.68%, while the dollar retreated. Crude slumped in New York.

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Many officials highlighted the need to curb inflation without slowing the economy too much, which somewhat heartened investors. But ultimately, the meeting minutes emphasized that the Fed will have a lot more to do if markets do not cooperate.

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“The Fed wanted to send a message to the market that they would not be easing or cutting rates anytime in 2023,” said Joe Gilbert, portfolio manager for Integrity Asset Management. “However, we must remember that the Fed also did not forecast raising rates by 400 basis points twelve months ago, so their forecasting ability of their own actions is sometimes quizzical.”

Investors also assessed slew of economic data on Wednesday. Latest numbers from the Institute for Supply Management underscored improving supply chain conditions, declining input prices and slower demand — all developments the Fed would welcome. But job openings data pointed to a robust labor market, which rattled investors earlier in the session.

All eyes will be on the non-farm payrolls report on Friday, for any signs of possible softening in the labor market.

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On the currency markets, the Bloomberg Dollar Spot Index fell 0.4%, the euro rose 0.5% to $1.0603, the British pound rose 0.8% to $1.2059 and the Japanese yen fell 1.3% to 132.69 per dollar.

🔑 The day’s key events:

Oil fell almost 10% in two days in the face of China’s struggling recovery. The rising death toll overshadows the country’s determination to boost its economy again.

West Texas Intermediate fell 5.32% to below $73, with crude down 9.5% in the last two sessions. On the other hand, Brent for March delivery fell by 4.88% to $78.09.

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Investors are hoping that China’s easing of its Covid-zero policy will eventually revive demand in one of the world’s largest energy importers. However, the outbreak of infections has stalled the recovery.

“The disconnect between the anticipation of China’s recovery by forward-looking assets such as energy equities does not translate into immediate strength in crude, as there is a lot of near-term risk to demand before we see the recovery take hold,” said Rebecca Babin, senior energy trader at CIBC Private Wealth Management.

Also weighing on prices has been the pre-holiday freeze, which has sapped refinery capacity in parts of the US, and reduced crude processing capacity in North America. “I think there will be a few more weeks of weakness,” said Amrita Sen, chief oil analyst at consultancy Energy Aspects Ltd.

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🍝 For the dinner table debate:

Latin American companies are reinventing themselves within the accelerated digital transformation. As they test new technologies, they need skilled talent. In this context, experts consulted by Bloomberg Línea shared what will be the most demanded technology professions in 2023.

Towards digital transformation, in the main economies of the region: Argentina, Brazil, Chile, Colombia, Mexico and Peru, “large Latin American companies are moving from feeling that they have to change to changing,” said Alberto Otero, partner and head of Americas Digital Technology at NTT DATA Europe and Latin America.

By the first quarter of 2023, according to Carlos Bueso, director of Experis Mexico, “explosive technological growth” will continue and this time “technological positions will be more sophisticated or more specialized, requiring deeper knowledge of technology platforms, which makes hiring dynamics more difficult”.

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In this context, these will be the most demanded technological professions in 2023 in Latin America, according to trends and experts: computing, technology project managers, data analysis specialists, metaverse construction specialists, 5G specialists, blockchain, software developers and cloud architects or engineers.

Leidys Becerra, a content producer at Bloomberg Línea, and Isabelle Lee and Peyton Forte of Bloomberg News, contributed to this report.