Peru Leads LatAm Market Gains; S&P 500 Snaps Six-Day Slide

The Bank of England’s intervention helped calm market sentiment, a feeling that also boosted Latin American stock markets

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, US. Photographer: Michael Nagle/Bloomberg
By Bloomberg Línea and Bloomberg News
September 28, 2022 | 06:55 PM

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

👑 Peru leads Latin American gains:

Latin American stock markets benefited from the international mood and the drop in risk aversion generated by the recovery of markets in the United States and Europe.

The S&P/BVL Peru (SPBLPGPT) led the region’s recovery after it posted a gain of almost 3%. The financials and materials sectors helped the Peruvian stock market rally, with shares of Minas de Buenaventura (BVN), Minsur (MINSURI1), Credicorp (BAP) and Southern Perú (SCCO) the best performers.

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In a conversation with Bloomberg Línea, Raúl Jacob, vice president of finance and CFO of Southern Perú, revealed that the mining company is moving forward with the exploration of Michiquillay, a project located in the Cajamarca region with an investment horizon of $2 billion.

The rebound was also seen in the Brazilian and Mexican stock exchanges. The S&P/BMV IPC (MEXBOL) advanced with the rebound in the communication services, finance and materials sectors.

Shares of Volaris (VOLARA), Grupo Elektra (ELEKTRA) and Regional SAB (RA) had the strongest showing

Brazil’s Ibovespa (IBOV) followed the improvement in the global scenario and ended Wednesday’s session with gains. Investors, however, are still waiting for the first round of the presidential election on Sunday.

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📉 A bad day for Chile’s IPSA:

Chile’s IPSA (IPSA) was the only Latin American stock index that failed to catch the international mood and closed with losses after it had managed to advance 0.04% in Tuesday’s session.

The IPSA was dragged down by the performance of the real state, energy and materials sectors, with shares of Cencosud (CENCOSHO), Copec (COPEC) and Parque Arauco (PARAUCO) posting the sharpest losses.

A report by Renta 4 Chile had already predicted a day of losses in the market, amid the uncertainty that investors still feel about the possibility of a recession.

A model created by JPMorgan Chase (JPM) strategists indicates that the fall of the S&P 500 in the US implies a 92% probability of economic recession in the United States, compared to 51% in August.

🗽 On Wall Street:.

US stocks and Treasuries rallied on Wednesday after the Bank of England’s decision to stage a market intervention boosted UK bonds and tentatively calmed markets.

The S&P 500 snapped a six-day rout. It rose the most since early last month, and for the first time since the Federal Reserve boosted rates and dialed up its hawkishness a week ago. The index jumped more than 2% later in the session, bolstered by gains in Amazon.com Inc.’s shares after the company’s annual device event on Wednesday showed it pushing further into wellness, security and the auto industry.

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The S&P 500 climbed 1.97%, the Dow Jones Industrial Average 1.88% and the Nasdaq Composite (CCMPDL) 2.05%.

S&P 500 Index has tumbled 23% amid recession jittersdfd

The 10-year US Treasury yield dropped toward 3.72% after topping 4% earlier. The yield on 30-year UK gilts plunged more than one percentage point. Oil advanced with metals. Orange juice futures spiked as Hurricane Ian made landfall in Southwest Florida.

Global markets enjoyed a break from the brutal selling that has gripped them since the Fed embarked on the most aggressive path of interest-rate hikes by since the 1980s. The Bank of England soothed nerves after it said it would buy long-dated government bonds in whatever quantities were needed to end the chaos caused by the government’s plans to slash taxes.

Fed officials remained diligent in warning that more rate-hike pain is yet to come, with Atlanta Fed President Raphael Bostic and Chicago Fed President Charles Evans reinforcing the hawkish stance their colleagues have been hammering home all week.

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“All eyes are on inflation and interest rates, and this renewed hawkishness or more aggressive hawkishness from the Fed has certainly sent equity markets into a period of concern here,” said Josh Emanuel, chief investment officer of investment management at Wilshire. “From this point forward, equities are really going to take their cues from bond market. So if you see bond yields move lower, that is a good sign for equities.”

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Stocks may also be rising because the markets have priced in the Fed’s hawkishness, according to Adrian Helfert, chief investment officer of multi-asset strategies at Westwood Holdings Group.

“It’s harder for the central bank and the speakers to say much more -- short of saying that they’re going to start hiking by a hundred basis points for the next several meetings,” he said. “Maybe the market is at least now believing what the Fed is saying.”

But economists are still worried that the central bank is committing another error after being too slow to respond to inflation, since a series of jumbo hikes mean officials are not weighing the impact their actions are having on the economy.

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Geopolitical tensions also continued to simmer. Natural gas prices in Europe surged after Russia said it may cut off supplies via Ukraine and the German Navy was deployed to investigate the suspected sabotage to the Nord Stream pipelines. While the European Union proposed a new round of sanctions on Russia, the growing exodus of Russians fleeing President Vladimir Putin’s mobilization order is creating turmoil at the borders with neighboring states and stirring fears about potential instability.

Any rally in the face of these challenges “will likely be met with skepticism given the dual headwinds of rapidly slowing global growth, pressuring earnings, and increasingly tight liquidity, pressuring valuations,” said Cameron Dawson, chief investment officer at Newedge Wealth.

Las pérdidas en las bolsas de Estados Unidos se tomaron un descanso tras una racha de siete días de caídas que se completó el martes. Los anuncios del Banco de Inglaterra ayudaron a paliar los ánimos de los mercados, que han tocado mínimos del año ante los temores que han generado las decisiones de los bancos centrales.

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he dollar dropped on Wednesday. But its recent rally brought losses to other currencies, including the euro and onshore yuan, which tumbled to its weakest level since 2008. A regulatory body guided by the People’s Bank of China urged banks to protect the authority of the yuan fixing.

The Bloomberg Dollar Spot Index fell 1%, the euro rose 1.4% to $0.9731, the British pound rose 1.4% to $1.0880, and the Japanese yen rose 0.5% to 144.14 per dollar.

🔑 The day’s key events:

Oil prices also recovered on Wednesday, although investors were more focused on energy security concerns in Europe after European Union authorities raised suspicions that damage to three links of the Nord Stream pipeline was due to sabotage.

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“The damage to Nord Stream is very worrying both from a supply standpoint and from a political standpoint, as it ensures that supply from Russia is unreliable,” Dennis Kissler, senior vice president at Bok Financial Securities, said in remarks seen by Bloomberg.

This was coupled with announcements by European Commission President Ursula von der Leyen that the EU will propose a new ban on Russian products, in addition to banning the sale of key technology that could benefit the Kremlin’s military.

In the package of measures there would also be a ban on shipping Russian oil to other third countries above a set price ceiling.

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Bullish sentiment also received a boost from a drop in US crude inventories that fell by 215,000 barrels last week, according to an Energy Information Administration report. West Coast gasoline stocks fell to their lowest level in 10 years.

🍝 For the dinner table debate:

What could become one of the most costly storms in US history made landfall in the state of Florida on Wednesday afternoon. Hurricane Ian hit the US as a Category 4 hurricane, its winds coming within two miles per hour of making it a Category 5.

Nearly all of Florida’s 21 million residents are bracing for massive power outages and flooding, Bloomberg reported. “It will be a tragic event,” the state’s governor, Ron DeSantis, had warned as the storm approached the coast.

Damage and economic losses in the area could range from $60 billion to $70 billion if the current forecast holds, Chuck Watson, a disaster modeler for the firm Enki Research, said in comments seen by Bloomberg.

In addition to roof-shredding winds and storm surges, Ian is forecast to drop nearly 60 centimeters of rain in central Florida and cause rivers across the state to burst their banks for days. Power outages will be widespread.

-- Carlos Rodríguez Salcedo, a content producer at Bloomberg Línea, and Vildana Hajric and Peyton Forte of Bloomberg News, contributed to this report.