Natura Plunge Batters Brazil’s Ibovespa; S&P 500 Sees Sharpest Weekly Fall Since June

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

🥇 Argentina leads in Latin America:

Latin American markets closed mixed on Friday, amid risk aversion in the US, while Chile’s and Mexico’s markets remained closed due to public holidays.

Argentina’s Merval index (MERVAL) led the gains in Latin America and recovering Thursday’s losses, with shares of YPF (YPFD), Banco Macro (BMA) and Edenor (EDN) seeing the sharpest climbs.

Peru’s stock exchange remained almost flat, the S&P/BVL Perú index (SPBLPGPT) climbing just 0.02% on a day on which the central bank reduced its economic growth forecasts. The bank’s projection was lowered by 0.1 percentage points for 2022, from 3.1% to 3%.

The central bank’s governor Julio Velarde said in a press conference Friday that the latest report on inflation forecasts lower GDP growth in the mining sector, as well as lower investment in the sector due to stoppages at various mines.

📉 A bad day for Brazil:

Amid risk sentiment generated by expectations of higher interest rates and lower economic growth, Brazil’s stock market recorded the sharpest drop in Latin America on Friday, with the Ibovespa (IBOV) dragged down by the plunge of Natura (NTCO3) shares, which closed with a fall of more than 10%.

The share plunge came after the company said that its board is not “currently conducting any specific studies” on a possible spin-off of Aesop or the sale of Body Shop Natura, Bloomberg reported. The company added that it “constantly evaluates” all strategic alternatives for value creation and “does not rule out” revising its business models, according to a statement.

Given that the recent stock rally was mainly driven by the prospects of a possible asset sale, “we would not be surprised if the move reverses in the coming sessions,” wrote Thiago Macruz, an analyst at Itau BBA in a note, reviewed by Bloomberg.

The Brazilian index was also impacted by the poor performance of the real estate, communication services and public services sectors.

🗽 On Wall Street:

Stocks fell, capping the worst week since the market hit its low for the year in June, as FedEx Corp.’s warning added to growing concern over outsized Federal Reserve interest-rate hikes.

The S&P 500 fell for a third day this week, down close to 5% for the period, the most since the week ended June 17. The Nasdaq 100 sank 5.8% in the five-day period for the worst week since January. Dip buyers emerged in afternoon trading, with gains in some big tech names including Nvidia Corp. and Intel Corp. FedEx plunged more than 20% after the package-delivery giant withdrew its earnings forecast, citing weakening business conditions.

On Friday, the S&P 500 dropped 0.72% to cap a 4.77% weekly drop, while the Nasdaq 100 had its worst weekly loss since January, falling 0.55% during the day, and the Dow Jones Industrial Average ended the day 0.45% lower to end the week with a drop of 4.13%.

Equity markets took an abrupt pivot lower this week after hotter-than-expected inflation data spurred traders to ratchet up wagers for rate hikes and sparked the worst one-day stock selloff in two years. Since then swaps continue to price-in a 75 basis-point hike when the Fed meets next week -- with some wagers leaning toward a full point -- and policy-sensitive two-year yields have climbed this week to the highest level since 2007, deepening the curve inversion that’s seen as a recession signal.

“The US is probably at the gate of a recession of an unknown depth -- equities see it as very limited, credit markets as contained while the 2-10 slope expects a more dire situation,” said Florian Ielpo, head of macro research at Lombard Odier Asset Management. “A significant layer of macro uncertainty now dominates markets.”

On the technical side, the S&P 500′s pivot below a key Fibonacci retracement of June-August rally has Win Thin, head of currency strategy at Brown Brothers Harriman, suggesting stocks could revisit June lows.

“It really reflects the ongoing repricing of risk assets in a world of tighter and tighter liquidity,” he said. “Equities, EM, risk all benefited from years of zero interest rates and now we are seeing the other side of that trade. Bottom line: further losses likely in risk assets.”

FedEx’s warning comes as companies across industries start to paint a grimmer picture of the economy. Bank of America Corp.’s Michael Hartnett said an earnings recession will likely drive US stocks to new lows, well below current levels.

Traders briefly priced the Fed’s key policy rate peaking at 4.5% in March this week as the central bank escalates its effort to contain inflation. That expected peak was up by a full percentage point since the Fed’s last policy meeting in July.

A gauge of dollar strength was little changed, with greenback trading mixed against major peers. A University of Michigan survey showed inflation expectations dipped, with consumers expecting prices will climb at an annual rate of 2.8% over the next five to 10 years, the lowest since July 2021, according to the survey. They see costs rising 4.6% over the next year, the lowest since last September.

Europe’s benchmark share gauge fell for a fourth day of losses, with mail and parcel delivery companies taking a hit after FedEx’s warning. The UK’s benchmark outperformed as the British pound sank to its weakest level against the dollar since 1985.

The Bloomberg Dollar Spot Index was little changed, the euro rose 0.1% to $1.0013, the British pound fell 0.4% to $1.1424, and the Japanese yen rose 0.4% to 142.91 per dollar.

🔑 Key events of the day:

Oil closed its third week of losses on Friday after US inflation data came in higher than expected this week, stoking expectations of interest rate hikes that could dampen economic growth.

“The oil market is losing its tightness and this is likely to continue if central banks around the world remain aggressive in the fight against inflation,” said Edward Moya, senior market analyst at Oanda.

West Texas Intermediate futures closed at $85.11 a barrel, down 1.9% from the previous week. While Brent, for November settlement, closed at $91.35 a barrel.

“This has been a bad week for oil prices as global growth fears look like they are not going away any time soon. There is only bad news on the demand side for crude in both the US and Europe,” said Moya.

🍝 For the dinner table debate:

Jeff Bezos is no longer the second richest person in the world, having been knocked off the No. 2 spot by Gautam Adani, the Indian tycoon who has climbed the ranking during 2022.

Adani, who began the year in 14th place in the Bloomberg Billionaires Index, is now only behind Elon Musk and his $260 billion. The Indian, meanwhile, has a fortune of $146.9 billion.

The rise is mostly a consequence of Adani Enterprises Ltd. shares rising to a record this week, and some of the group’s companies have grown more than 1,000% since 2020, Bloomberg reported.

In contrast, Bezos’ net worth had fallen to $145.8 billion on Friday, after another day of selling on the NYSE put further pressure on the fortunes of US billionaires.

-- Carlos Rodríguez Salcedo, a content producer at Bloomberg Línea, and Stephen Kirkland of Bloomberg News, contributed to this report.