Pampa Energía Shares Power Argentine Market Recovery; US Stock Rally Falters

Argentina’s MERVAL index breaks a five-day streak of losses, leading the gains in Latin America on Monday, while the Chilean and Colombian markets remained closed

Pampa Energía. La empresa emitió sus primeros bonos verdes.
By Bloomberg Línea and Bloomberg News
June 27, 2022 | 07:30 PM

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

👑 Latin America’s Leader:

The stock markets of Argentina, Brazil and Mexico were not affected by the falls in the United States on Monday, while the markets of Chile and Colombia remained closed due to national holidays.

Argentina’s Merval (MERVAL) put in the best performance in the region and closed with an increase of over 3%, breaking a five-day streak of consecutive losses. Pampa Energía (PAMP) shares led the day with gains of more than 10%.

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The stock’s growth comes after Morgan Stanley analysts raised their recommendation on the Argentine energy company, Bloomberg reported.

“Pampa is well positioned to capture profits, increasing capex and gas production, while enjoying higher prices and margins,” Bruno Montanari wrote in a research note.

YPF (YPFD) and Loma Negra (LOMA) stocks were also among the best performers of the day.

Brazil’s Ibovespa (IBOV) mirrored the positive performance and also closed higher.

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Petrobras (PETR3; PETR4) and Vale (VALE3) shares boosted the Brazilian index on a positive day for commodities after the easing of anti-Covid-19 measures in China.

The market also reacted after Petrobras’s board of directors approved the appointment of Caio Paes de Andrade as the new CEO.

In Mexico, the S&P BMV/IPC (MEXBOL) also ended the day with gains thanks to strong showings in the consumer staples, financials and real estate sectors.

📉 A Bad Day:

Peru’s stock market closed with losses, the S&P BVL Peru down 0.20%, affected by the performance of the utilities, finance and raw materials sectors.

Shares of Nexa Resources Peru (NEXAPEC1), Engie Energia Peru (ENGIEC1), and Volcan Cia Minera (VOLCABC1) were among the day’s worst performers.

The Peruvian market has been affected by the international fall in the price of copper, after it closed Friday with its sharpest weekly decline in a year.

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The lower price of copper endangers Peru’s GDP growth estimate for 2022, as it is the main raw material for the Andean country’s exports, Alberto Arispe, general manager of Kallpa SAB, said

🗽 On Wall Street:

US contracts fluctuated after the S&P 500 and tech-heavy Nasdaq 100 posted small losses on Monday. Periodic institutional portfolio rebalancing is also affecting trading flows, Bloomberg reported.

The S&P 500 slipped 0.30%, the Dow Jones Industrials dropped 0.20% and the Nasdaq Composite (CCMPDL) closed with a 0.72% loss.

China’s bourse has become a bright spot in an otherwise dour backdrop. The CSI 300 is up more than 5% this quarter, compared with a 14% drop in global shares. Central bank Governor Yi Gang vowed to maintain supportive monetary policy to boost the economy’s recovery from Covid and other stresses.

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Treasuries fell after weak demand at auctions. The 10-year yield climbed back to around 3.2%. Crude oil rose toward $110 a barrel as Libya and Ecuador flagged potential output cuts on political unrest.

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Rallies in risk assets have proved fleeting as higher borrowing costs to fight inflation slows economic activity in a slew of nations. Some analysts argue that still-bullish earnings estimates are next in line for a reality check.

“This is the risk in full play; we are living through a downside adjustment,” Chris Iggo, chief investment officer of core investments at AXA Investment Managers, wrote in a note. “Covid era valuations -- boosted by excess liquidity -- have been obliterated, higher bond yields are pressuring equity valuations and there is a risk that the earnings cycle is about to turn down.”

🔑 The Day’s Key Events:

Oil prices extended their advance after investors received news that the G-7 is weighing a price cap on Russian oil. However, the decision would only allow crude from that country and oil products sold below an agreed threshold, according to sources cited by Bloomberg.

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European Council President Charles Michel confirmed that leaders planned to discuss the proposed cap in detail, but that there were “many challenges” to overcome.

“We are ready to make a decision together with our partners, but we want to make sure that what we decide will have a negative effect on Russia and not on ourselves,” Michel told reporters at the summit, Bloomberg reported.

The market is also watching to see if there is a decline in international supply.

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Libya’s National Oil Corporation pointed to a possible dent in supply due to a worsening political crisis amid a clash between two politicians, Abdul Hamid Dbeibah and Fathi Bashagha, who claim to be the legitimate prime minister.

Meanwhile, Ecuador could halt oil production even sooner due to civil unrest, as protesters decry high fuel prices in the country, and despite the government of President Guillermo Lasso having reduced prices on the weekend in a bid to quell the protests.

🍝 For the Dinner Table Debate:

Boom times for venture capitalists appear to be behind them, due to the current adverse economic conditions.

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With growth stocks falling, a recent wave of layoffs and central banks struggling to control inflation, venture capital funds have seen a pullback in returns.

According to an analysis by Pitchbook, venture capital fund returns are already suffering a cut.

Preliminary data for the first quarter of 2022 alone indicates that 68.1% of venture capital funds recorded a drop in valuations from their 2021 peak, which was a multi-year high. Of those funds with downgrades, the average decline was 7.8%.

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This affects Latin America considering that 62% of financing rounds include foreign capital, according to an Endeavor and Glisco Partners report, Latin American Venture Capital Outlook.

-- Carlos Rodríguez Salcedo, a content producer for Bloomberg Línea, and Andreea Papuc, of Bloomberg News, contributed to this report