This is a roundup of Tuesday’s stock market results from across the region.
🥇 The Leader:
The Peruvian stock market detached itself from the performance of the US markets as its main index posted the largest increase in Latin America.
Peru’s S&P/BVL rose almost 1% on the back of strong performances in the materials, financials, and consumer sectors. Shares of Empresa Siderurgica del Peru (SIDERC1), Minera Cerro Verde (CVERDEC1), and Buenaventura Mines (BVN) were among the day’s strongest gainers.
Mining stocks in Peru benefited from the rebound in the price of copper, which rose 1.41% in the last three days on the London Metal Exchange.
🗽 On Wall Street:
Stocks slumped after paltry economic figures and a weaker outlook from the world’s largest retailer underscored the impacts of inflation pressures on consumer spending, with recession fears running rampant as the Federal Reserve gets ready to deliver another jumbo-sized hike.
Walmart Inc.’s rout engulfed industry peers, with Morgan Stanley saying its forecast is a “potential warning signal” for Amazon.com Inc.’s (AMZN) merchandise margins. In late trading, a $166 billion exchange-traded fund tracking the Nasdaq 100 (QQQ) rose as Google’s parent Alphabet Inc. (GOOG) and Texas Instruments Inc. (TXN) surged after earnings. Microsoft Corp. (MSFT) fell amid its slowest sales growth since 2020.
Traders also braced for another 75-basis-point hike by Fed officials on Wednesday, with a combined increase of 150 basis points over June and July representing the steepest rise in rates since the early 1980s when then chairman Paul Volcker was battling sky-high inflation. Dimming views on the economy sank US consumer confidence to the lowest level since February 2021, while a gauge of new home sales fell for the fifth time this year.
US officials are likely to stay hawkish for longer amid persistently high inflation, according to Goldman Sachs Group Inc. strategists, the latest to enter the debate around a potential central bank pivot as growth slows. They echoed the views from Morgan Stanley’s Michael Wilson, who noted Monday it’s too early to expect the Fed to stop hiking. Meantime, JPMorgan Chase & Co. (JPM) strategists said bets that prices have peaked will lead to a Fed pivot and improve the picture for equities in the second half.
“A soft landing feels like a long shot from here,” wrote Seema Shah, chief global strategist at Principal Global Investors. “In the last 11 tightening cycles, the Fed has only skirted recession three times (1965, 1984 and 1994). In each of those cycles, inflation was lower and the Fed funds rate was meaningfully higher at the point of liftoff, so Fed tightening didn’t need to be as dramatic as it does today.”
🔑 The Day’s Key Events:
The International Monetary Fund (IMF) released its growth forecasts for this and next year and, despite a bleak outlook for the economy, it increased its projections for Latin America and the Caribbean. The IMF estimates that the region will grow 0.5 % more this year, compared to what it expected last April, allowing a regional GDP growth rate of 3.0% this year.
The Washington-based organization explained the improved forecast stems from the performance of Brazil, Mexico, Colombia and Chile.
Regarding Brazil and Mexico, the region’s biggest economies, the IMF forecast that the Brazilian economy will post a positive variation of 1.7% by the end of 2022, while Mexico’s economy is expected to grow by 2.4% at the end of the year.
Additionally, the IMF issued an advance forecast for the Argentine economy: it expects a 4.0% growth this year, followed by a 3.0% increase in 2023.
📉 At the end of a bad day:
Market sentiment in the U.S. spread to Latin America’s largest stock exchanges with Mexico’s market posting the sharpest drop among its peers.
The S&P BMV/IPC (MEXBOL) extended the losses that started the week and declined more than 1% during the day.
Health care, materials and industrials sectors dragged down the index’s performance. Grupo Televisa (TLEVICPO), Grupo Aeroportuario del Pacífico (GAPB) and Cemex (CEMEXCPO) were among the worst performers.
There were also losses in the Ibovespa (IBOV), which closed with a 0.50% drop. Risk aversion dictated the course of the markets on Tuesday and contributed to the fall of the Brazilian index.
Recession fears gripped investors amid weaker data from Walmart and the impact was felt in the Brazilian stock market. Retailers such as Magazine Luiza (MGLU3) and Via (VIIA3) were among the top losers on Tuesday.
Markets in Latin America also got the bad news in the shape of a Fitch Ratings report on the wave of protests in Panama. According to the rating agency, social unrest could add an additional burden to the government’s deficit target.
“Panama’s response to the social unrest will have fiscal implications, the scale of which will depend on the duration of the protest activity, the length of time the announced measures are in effect, and whether additional measures are taken,” the agency said.
The government has approved spending up to $200 million to subsidize gasoline costs for three months. For Fitch so far, the fiscal impact of the demonstrations remains unclear.
🍝 For the dinner table debate:
China is reportedly trying to infiltrate the U.S. Federal Reserve, according to a briefing by Rob Portman, a top Republican legislator.
The Congressman noted that Fed investigations have identified several employees linked to Chinese intelligence scouts as well as attempts to obtain knowledge on the Fed’s monetary policy and access to internal data, according to Bloomberg.
“There is a clear risk, I urge the Fed to do more, working with the FBI, to counter this threat from one of our major foreign adversaries,” Portman, the ranking member on the Senate Committee on Homeland Security and Governmental Affairs, said in a statement.
The Fed Chairman Jerome Powell in a letter to Portman, reviewed by Bloomberg, voiced his “great concern about the statements and implications” made in the report.
He told Portman that central bank personnel with access to sensitive information are subjected to “exhaustive” background checks.