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Mexico’s Market Outperforms in LatAm; S&P 500 Sees Best Day Since May 2020

Latin America’s markets closed with gains on Friday, while the NYSE saw a day of optimism, with the S&P 500 closing its best week in nearly a month

A worker uses computers to monitor the control panels at the Cemex Latam Holdings SA production facility in La Calera, Cundinamarca department, Colombia. Cemex shares rose on the Mexican Stock Exchange on Friday, June 24. Photographer: Nicolo Filippo Rosso/Bloomberg
By Bloomberg Línea and Bloomberg News
June 24, 2022 | 06:00 pm

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

👑 Latin America’s Leader:

Latin America’s stock markets were infected by Friday’s optimism in the United States and reversed two days on which most of the region’s markets had traded in the red.

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The fall in inflation expectations in the US and the increase in oil prices helped the performance of the region’s stock markets.

The trend was seen strongest in the Mexican stock market, with the S&P BMV/IPC (MEXBOL) ending the day with gains thanks to increases in the communication services, raw materials and non-core consumer products sectors.

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Shares of cement giant Cemex (CEMEXCPO) and telecommunications giant América Móvil (AMXL) were among the day’s best performers.

Brazil’s Ibovespa (IBOV) also followed the positive trend and closed higher.

📉 A Bad Day:

Argentina’s stock market was the only one that failed to register gains in the region, with the Merval (MERVAL) index closing with a 0.68% loss, chalking up five consecutive negative sessions, impacted this week by fears of a possible worldwide recession.

Shares of Sociedad Comercial del Plata (COME), Mirgor (MIRG) and Cablevision Holding (CVH) had the sharpest declines.

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🗽 On Wall Street:

US stocks rebounded from a rout that drove the market down for three straight weeks as the latest comments from Federal Reserve officials buoyed sentiment on the economy and a reading on inflation expectations eased.

The S&P 500 gained more than 3% Friday for its biggest advance since May 2020. That pushed its advance in the holiday-shortened week to 6.5%, the second best reading of the year. A rally in Treasuries waned Friday, but the policy-sensitive US two-year yield still recorded its biggest weekly drop since mid-May.

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The Dow Jones Industrials gained 2.68% and the Nasdaq Composite (CCMPDL) 3.34%.

While the Treasury market started flashing recession warnings this week, sentiment improved Friday after the University of Michigan’s gauge of longer-term consumer inflation expectations settled back from an initially reported 14-year high, potentially reducing the urgency for steeper rate hikes. Investors were also reassured by St. Louis Fed President James Bullard, who said worries over a US recession are overblown.

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Federal Reserve Chair Jerome Powell hardened his resolve to cool inflation in testimony to lawmakers this week, but some traders found solace in his comments as a signal that the central bank will factor in the probability of a recession as it moves to curtail inflation.

“We’ve now seen a couple of days of positive performance in the market and that’s indicative of a very short-term bear rally,” Bloomberg quoted Sylvia Jablonski, CEO of Defiance ETFs, as saying in a phone call.

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“The fact that we’re past the Fed meeting and any kind of Fed testimony, barring any additional bad news, this could continue for the next couple of days,” she added.

Earnings season will be the telltale as to whether the rally continues, she said.

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Others are still waiting to see how bond markets react to recent Fed comments and economic data.

“The volatility in the fixed income market has been even higher than the equity market when you take the move versus the VIX,” said John Flahive, head of fixed income investments at BNY Mellon Wealth Management. “That’s been really underpinning all the uncertainty across all the capital markets and one of our catalysts needed to kind of calm down the equity market, to get a bit of a footing, would really be for the bond markets to calm down.”

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Bitcoin rose, hovering around $21,000. The dollar fell. West Texas Intermediate crude rose after retreating over the previous two sessions. Sliding raw materials prices have contributed to a moderation in market-based measures of inflation expectations.

“It would appear that the Fed has succeeded at least temporarily” in its mission to cool an overheated economy, Lewis Grant, a senior portfolio manager at Federated Hermes, wrote in a note to clients. “Commodity prices have tumbled from their highs as recession fears grow.”

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🔑 The Day’s Key Events: Oil Up, Copper Down

Oil prices rebounded after inflation expectations began to ease in the United States, and the possibility was raised that the Federal Reserve could achieve a soft landing to control the high cost of living without the need to push the economy into recession.

The optimism caused the main benchmarks, West Texas Intermediate and Brent, to break the downward trend they had been on during the week, and close with an increase of more than 3%.

Recessionary rumblings had been affecting prices despite the fact that the oil market remains tight as Russia’s war on Ukraine continues.

Copper was unable to recover, falling 4.15% on the London Metal Exchange and closing with its sharply weekly loss in a year, according to Bloomberg.

The possibility of a recession has affected metal prices, amid lower demand from China as its strict Covid-19 policy persists.

🍝 For the Dinner Table Debate: US Supreme Court Overturns Roe vs Wade

The US Supreme Court on Friday overturned Roe vs. Wade, the law that had protected abortion rights since 1973, ended constitutional protection for the termination of pregnancies in the country.

Supreme Court Justice Samuel Alito said the Roe ruling was “egregiously wrong” and “on a collision course with the Constitution from the day it was decided”, Bloomberg reported.

After the vote, 26 states are set to ban or are likely to ban nearly all abortions, according to Guttmacher Institute tallies.

Supporters of abortion rights say overturning the ruling will have a devastating impact, threatening decades of economic benefits for women, and depriving millions of people of the right to make health decisions.

Currently, state-level abortion restrictions cost the US economy about $105 billion annually, according to a study by the Institute for Women’s Policy Research.

-- Carlos Rodríguez Salcedo, a content producer for Bloomberg Línea, and Emily Graffeo and Isabelle Lee, of Bloomberg News, contributed to this report