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U.S. Markets Sink; Colombia’s COLCAP Sees LatAm’s Sharpest Losses

Bitcoin falls to 18-month low on Monday as risk aversion contaminates digital assets

Stock market information on the floor of the New York Stock Exchange (NYSE) in New York, U.S. Photographer: Michael Nagle/Bloomberg
June 13, 2022 | 06:15 pm

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

🗽 On Wall Street:

Risk aversion took hold of U.S. markets on Monday and extended the losses recorded on Friday, after the United States recorded the highest inflation since 1981.

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The Consumer Price Index rose 8.6% year-on-year in May, rekindling fears that the Federal Reserve could adopt an even more hawkish stance that threatens economic growth.

Friday’s inflation data was the latest in a string of statistics released last week that suggest the world will face slower economic expansion amid relentless inflation.

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The Dow Jones Industrials fell 2.79%, the Nasdaq Composite (CCMPDL) plunged 4.68%, dragged down by technology stocks, while the S&P 500 dropped 3.88% and entered bearish territory, having accumulated a 22% drop from its January peak.

Yields on 10-year Treasury bonds rose to the highest level since 2011.

“Wall Street is facing a plethora of negative headlines, but the problem is that until we see a deterioration in credit conditions and market functioning, the Fed has the green light to tighten as much as possible to control inflation,” said Edward Moya, an analyst at Oanda.

Fitch Ratings was the most recent voice to join the wave of pessimism after it lowered its global GDP growth projection to 2.9% on Monday due to inflationary pressures.

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🔑 The Day’s Key Events:

The cryptocurrency market plummeted, as risk aversion spread to digital assets and drove Bitcoin (XBT) to an 18-month low.

The reduced appetite for risk among investors was also affected by crypto-lender Celsius’ decision to suspend withdrawals, swaps and transfers on its platform, where it manages the equivalent of $12 billion.

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A large number of withdrawals severely affected the company’s liquidity, particularly after rumors that it had suffered losses following Terra’s collapse last month, according to an analysis by Kaiko Research.

During the day, Binance, the world’s largest cryptocurrency exchange, also suspended bitcoin withdrawals for a few hours, citing a technical problem.

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The market capitalization of cryptocurrencies fell below US$1 trillion for the first time since January 2021.

📉 A Bad Day:

Latin American markets were infected by the reduced appetite for risk, and closed a day with the main stock exchanges posting losses.

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Uncertainty also affected Colombia’s COLCAP index, which saw the largest drop in Latin America. Not only did the performance of international markets set the tone for investors, but also the week prior to the second round of presidential elections in the country.

The plans of the two remaining presidential candidates, Gustavo Petro and Rodolfo Hernández, “could be difficult to implement in full”, due to the rigidity of government spending and political difficulties in raising taxes, according to a Fitch Ratings report published Monday.

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Brazil’s Ibovespa (IBOV) closed with the second sharpest decline in the region, dragged down by the performance of the consumer discretionary, information technology and healthcare sectors.

Investors now await this week’s “super Wednesday”, with interest rate decisions in Brazil and the United States.

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The Mexican stock market also followed the trend and the S&P BMV/IPC (MEXBOL) closing with losses, with the healthcare, non-core consumer products and real estate sectors posting the worst performance.

🍝 For the Dinner Table Debate:

An employee of Google’s parent company Alphabet (GOOGL) has been suspended by the company after claiming that an artificial intelligence projected demonstrated self-awareness. The employee is Blake Lemoine, a 41-year-old software engineer, who transcribed his alleged chat with the chatbot Language Model for Dialogue Applications (LaMDA). This bot has not yet seen the light of day commercially.

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The Guardian and The Washington Post reported that Google sanctioned the employee for breaking confidentiality policies when publishing the conversations.

Brad Gabriel, a Google spokesperson, said in turn that “the evidence does not support his claims”. “There is really no evidence that LaMDA is sentient. Quite the contrary,” he said.

Lemoine posted his alleged chat with LaMDA on a blog.

“Unlike other chatbots, this one has perception and the ability to express thoughts and feelings equivalent to a human child. If I didn’t know beforehand that it was a computer program, I would think it was a boy or girl,” Lemoine said.