Peñoles Shares Power Mexico’s Market Gains; NYSE Climbs as Risk Appetite Returns

Markets across the Americas started the week with gains as a weakened dollar boosts investor appetite for buying

Photographer: Michael Nagle/Bloomberg
By Bloomberg Línea and Bloomberg News
September 12, 2022 | 07:06 PM
Reading time: 6 min.

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

🥇 Mexico leads in Latin America:

As was the case at the end of last week, risk appetite helped Latin American stock markets. During the day, the main markets, with the exception of the Chilean market, closed higher.

The biggest increases were seen in the Mexican stock market thanks to gains in the S&P/BMV IPC (MEXBOL), which advanced with the performance of the communication services, finance and consumer staples sectors.

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The shares of Mexican mining company Industrias Peñoles, owned by Grupo Bal, enjoyed a historic performance, rising 23.6%.

The main catalyst for Peñoles shares was the rebound in the price of metals, especially silver, gold and zinc, the elements to which the mining company has the greatest exposure.

“Virtually all commodities are gaining today; what we are seeing is a generalized weakening of the dollar and this is driving the gains in many commodities,” said the director of financial analysis at Black Wallstreet Capital, Jacobo Rodriguez.

Risk appetite also boosted Brazil’s Ibovespa (IBOV). Retail stocks such as Via (VIIA3) and Magazine Luiza (MGLU3) led the gans, while Vale (VALE3) shares also rose, driven by the climb in iron ore prices.

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Investors in Brazil continue to monitor price behavior, now with lower inflation projections for next year, according to the Focus Report released this morning by the central bank.

📉 A bad day for Chile’s IPSA:

In contrast to all the markets in the region, the Chilean stock market fell by 0.28%, the IPSA index (IPSA) dragged down by the shares of mining company SQM/B (SQM/B), which has the largest weight in the composition of the index.

The company’s stock fell by 4.60% after accumulating a growth of more than 14% last week and following announcements that Tesla (TSLA) is evaluating the construction of a lithium refinery in Texas.

The company told the state that the facility would process “raw mineral material into a usable state for battery production.” Tesla CEO Elon Musk has advocated the rapid development of lithium mining in North America, which would be competition to production from companies such as SQM/B.

The resulting lithium hydroxide would be “packaged and shipped by truck and rail to various Tesla battery manufacturing centers,” the company added in a tax-exempt filing seen by Bloomberg.

🗽 On Wall Street:

US stocks rose on the final day of trading before the release of key consumer-price data, with risk sentiment buoyed by speculation inflation is near peaking. The dollar fell for a second day.

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The S&P 500 extended last week’s rally, notching the biggest gain over a four-day span since June as all 11 major industry groups rose. Apple Inc. was the largest contributor to the benchmark’s advance as pre-order data showed the iPhone 14 Pro Max was the best selling model, surpassing what the older version did over a similar timeframe.

The S&P 500 climbed 1.06%, the Dow Jones Industrial Average 0.71% and the Nasdaq Composite (CCMPDL) 1.27%.

The dollar declined versus all of its G-10 peers except the yen. The Treasury curve steepened, with 10-year yields rising after a weak auction of similar-maturity notes.

US inflation data due Tuesday is expected to show headline CPI cooled in August to an 8% a year pace while the core measure that excludes food and energy is seen accelerating. Meanwhile, traders almost fully expect another jumbo-sized Federal Reserve hike next week, following two 75-basis-point increases, taking their cue from central bank officials supporting that view.

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US bond-market indicators suggest that investors are gaining confidence that this year’s spike in inflationary pressures will be brought under control. The cost of hedging high inflation has fallen, while so-called breakeven rates on Treasury Inflation Protected Securities -- a proxy for where markets expect inflation to be -- have also dropped.

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“I cannot see any scenario where the market doesn’t decide that CPI is heading in the right direction and that October will be lower than September and so on,” Peter Tchir, head of macro strategy at Academy Securities, wrote in a note. “That combination should allow markets to continue to enjoy the strength that they saw towards the end of last week.”

Stocks are building a bullish technical trend after the S&P 500 rallied above 3,900 week with an increasing number of stocks passing key thresholds, according to Bank of America Corp.’s technical strategist Stephen Suttmeier.

Swap markets are pricing in more than 70 basis points of hikes at the central bank’s September meeting. Fed Governor Christopher Waller said last week he favors “another significant” increase in interest rates, and St. Louis Fed President James Bullard said he was leaning “more strongly” toward a third straight jumbo hike.

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“The bad news is that US CPI inflation above 8% keeps the Fed hawkish and interest-rate volatility high,” Yuri Seliger, credit strategist at Bank of America, wrote. “The good news is that US inflation is peaking now according to our economists, and the trend should flip to a clear downward trajectory in 4Q and into 2023.”

Crude oil and industrial metals advanced as the dollar’s descent countered demand concerns. Bitcoin extended a rally amid a brighter mood in global markets, climbing to a three-week high above $22,000.

On the currency markets, the Bloomberg Dollar Spot Index fell 0.4%, the euro rose 0.7% to $1.0115, the British pound rose 0.8% to $1.1677 and the Japanese yen fell 0.3% to 142.84 per dollar.

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🔑 Key events of the day:

The weakness of the US dollar gave another boost to oil prices after they rose last Friday after hitting six-month lows. A weaker greenback makes commodities priced in that currency more attractive, with the two main benchmarks, WTI and Brent, continuing to recover some of the ground lost last week.

The market has watched with concern the closures that China continues to make to control Covid-19, although there are analysts who see bullish signs for prices.

“Food and medicine shortages in China increase the odds that President Xi will soon have to abandon his Zero Covid policy. The oil market remains tight and the latest drop was overdone,” said Edward Moya, an analyst at Oanda.

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Add to that European sanctions against Russian supply starting Dec. 5 and higher oil usage in the face of record gas prices that would help support the market, Rebecca Babin, senior energy trader at CIBC Private Wealth Management, said at a Bloomberg event.

🍝 For the dinner table debate:

The number of people subjected to forced labor or marriage in 2021 amounted to 50 million, according to a report prepared by the International Labor Organization, the International Organization for Migration and Walk Free. This number is equivalent to almost one in every 150 people worldwide.

According to the report, seen by Bloomberg, the pandemic and confinements led to a rapid deterioration in conditions for many workers, similar to the effect that climate change and armed conflict are already having.

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“Modern slavery is the antithesis of sustainable development. Yet in 2022 it is still present in our global economy,” said Grace Forrest, founding director of Walk Free.

“In a time of compounding crises, genuine political will is the key to ending these human rights abuses,” she said.

According to the report, most adult forced labor takes place in the service, manufacturing, construction, agriculture and domestic work sectors.

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

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