A roundup of Thursday’s stock market results from across the region
🥇 Peru leads in Latin America:
Latin American stock markets also advanced although it was not a session of big gains. The Peruvian market had the highest increase after the S&P/BVL Peru (SPBLPGPT) rose by almost 1%.
The main index of the Peruvian stock market rose thanks to the performance of the materials, industrial and financial sectors.
Shares of Southern Copper Corp. (SCCO), Minsur (MINSURI1) and Unacem (UNACEMC1) saw the strongest gains.
The Mexican stock market also advanced and maintained the gains with which it closed on Wednesday. The S&P/BMV IPC (MEXBOL) rose with gains in the materials, healthcare and consumer staples sectors, with shares of Grupo México (GMEXICOB), Industrias Peñoles and Walmex (WALMEX*) having the strongest showing.
Brazil’s Ibovespa (IBOV) swung between gains and losses and struggled to find direction throughout the day, but closed with gains, boosted by the technology and consumer discretionary sectors. Brazilian assets experienced a session of adjustment after they trading remained closed on Wednesday for the Independence Day holiday.
📉 A bad day for Colombia’s COLCAP:
Colombia’s COLCAP (COLCAP) index chalked up three consecutive sessions of losses, and saw the sharpest fall in the region on Thursday, dragged down by services, materials and energy sector shares.
Celsia (CELSIA) shares suffered their sharpest drop since August as high inflation continues to pummel the country’s economy, and the government of President Gustavo Petro has announced a plan to act on containing high electricity prices.
Canacol Energy (CNEC) shares also slumped, along with those of Grupo Argos and Grupo Sura.
🗽 On Wall Street:
Volatility gripped the stock market as unsurprising remarks from Jerome Powell and his colleagues did little to alter bets on another super-sized rate hike during the Federal Reserve’s September gathering.
In the final 15 minutes of trading, the S&P 500 extended its advance to close above 4,000 for the first time since late August -- pushing further away from a level seen by chartists as critical for short-term direction. The benchmark swung between gains and losses all day as the Fed’s boss reprised his hawkish views from the Jackson Hole confab, saying officials are strongly committed to their fight against inflation.
The S&P 500 climbed 0.66%, the Dow Jones Industrial Average 0.61% and the Nasdaq Composite (CCMPDL) 0.60%.
A selloff in Treasuries sent the yield on the policy-sensitive two-year note up eight basis points to 3.51%. Swap traders priced a roughly four-in-five chance that Fed officials will implement a 75-basis-point hike this month.
Powell said the central bank won’t flinch in its efforts to curb inflation “until the job is done.” “We need to act now, forthrightly, strongly as we have been doing,” he noted at a Cato Institute’s conference. “It is very important that inflation expectations remain anchored,” Powell said, adding that “what we hope to achieve is a period of growth below trend, which will cause the labor market to get back into better balance.”
Separately, Fed Bank of Chicago President Charles Evans said “we could very well do 75 in September,” while adding that he’s “open minded.” His St. Louis counterpart James Bullard noted that bringing inflation back down to the 2% target is the “top priority.”
“Fedspeak has once again injected volatility (after all, it is September) into the rangebound environment,” wrote Julian Emanuel, chief equity and quantitative strategist at Evercore, highlighting “Powell’s view that the ‘clock is ticking’ on intolerably high inflation expectations becoming part of the American consumer’s behavioral norm.”
To Michael Gapen at Bank of America Corp., the September Fed meeting may still be a “game-time decision.” Should next week’s consumer inflation data surprise to the downside, that could open the door to a smaller rate increase. Still, the economist says it’s more likely than not that the Fed will deliver a 75-basis-point hike.
Read: Scott Minerd Says Stocks May Drop ‘Another 20%’ by Mid-October
Seasoned investors, staring at a world clouded by war, inflation and economic uncertainty, are buying catastrophe insurance at a record clip. Institutional traders paid a total of $8.1 billion to initiate purchases of equity puts last week, the highest premium in at least 22 years, Options Clearing Corp. data compiled by Sundial Capital Research show. Adjusted for market capitalization, demand for hedges matches levels from the 2008 financial crisis.
US stocks could slide a further 25% if the economy tips into recession, with risks to a sustained equity rally mounting, according to Deutsche Bank AG strategists. With company profits set to drop, valuations still high and economic risks looming, the fundamental picture is challenging, strategists led by Binky Chadha wrote in a note dated Sept. 7. Their base-case scenario still sees shares rising by year-end.
The recent equity selloff has left beaten-down smallcaps at the cheapest levels compared to their larger counterparts in nearly two decades, according to Bank of America. The group’s valuations could offer evidence of a stock bottom since historically, broader markets don’t bounce higher until smallcaps bottom.
“Very elevated valuation dispersion within the Russell 2000 overall -- which can suggest more opportunity for stock selection -- is also supportive for value near-term,” wrote Jill Carey Hall, equity and quantitative strategist at the firm.
Meantime, European bonds slid after the region’s central bank said it would temporarily remove a 0% cap for remunerating government deposits. That reduces the incentive to shift billions of euros of public money from cash into short-term debt. Officials are prepared to deliver another jumbo rate increase at their October meeting if the inflation outlook warrants an additional big step, according to people familiar with the debate.
Oil rebounded from an eight-month low as the market shrugged off a US report showing swelling crude stockpiles and slumping demand. Traders characterized the move as a technical correction following crude’s descent into oversold territory.
On the currency markets, the Bloomberg Dollar Spot Index was little changed, the euro was little changed at $0.9999, the British pound fell 0.3% to $1.1503 and the Japanese yen fell 0.2% to 144.02 per dollar.
🔑 Key events of the day:
Oil prices rebounded on Thursday after plunging more than 5% in Wednesday’s session, on the prospects of a slowdown in the Chinese economy. The market was attentive to the US reserves report and to the announcement that the US government is considering a new release of its strategic reserves.
On the one hand, the Energy Information Administration published that US crude oil inventories increased by 8.8 million barrels last week, while gasoline stocks rose by 333,000 barrels.
Separately, Bloomberg reported that officials in US President Joe Biden’s administration are looking for ways to avoid a spike in oil prices later this year, including the possibility of an additional emergency release of the country’s crude stockpiles.
US officials assess that prices could rise in December when European Union sanctions on Russian supplies take effect, according to people familiar with the deliberations cited by Bloomberg.
🍝 For the dinner table debate:
Queen Elizabeth II passed away Thursday at her residence in Balmoral, Scotland, at the age of 96.
During her 70-year reign, she was the protagonist of key moments in world history and became an icon of the British monarchy.
Elizabeth II became the UK’s longest-reigning monarch in 2015, when she surpassed the record of Queen Victoria, who had ruled between 1837 and 1901.
“The queen died peacefully at Balmoral this afternoon. The king and queen consort will remain at Balmoral this afternoon and return to London tomorrow,” the royal family statement said.
Her death marks the start of 10 days of mourning across the United Kingdom in which the monarch will be buried and her eldest son Charles will be proclaimed king, and who will be the oldest person to accede to the British throne, at the age of 73.
-- Carlos Rodríguez Salcedo, a content producer at Bloomberg Línea, and Rita Nazareth of Bloomberg News, contributed to this report.