A roundup of Tuesday’s stock market results from across the Americas
🌎 Merval hits highest level since 2019:
Argentina’s Merval (MERVAL) led the gains in Latin America on Tuesday, closing at its highest level since Alberto Fernández took office on December 10, 2019. But what are the reasons behind the euphoria in the Argentine stock market?
In conversation with Bloomberg Línea, financial analyst Franco Tealdi pointed to the possible purchase of Itaú's Argentine subsidiary by Macro as a catalyst for the good performance of Argentine equities. “Although in figures it is irrelevant - the market share of Itaú Argentina’s assets is 1.2% - what this news did was to reveal how cheap the Argentine banking system is,” the analyst pointed out.
Mauro Natalucci, account executive of Rava Bursátil, pointed out that with the appreciation of the Merval’s value by more than 5%, this index accumulates an increase of more than 34% in the period of one month. Among other reasons that justify the euphoria in the market, he pointed out that after learning about the debt swap in pesos by the Argentine government, with the purpose of postponing the maturities that are approaching, bonds in foreign currency and local stocks were boosted.
“The local stock market index reaches a new all-time high standing above 380,000 points, which is equivalent to an accumulated gain of over 313% year-on-year and 88% so far in 2023. In less than three months, the local market has risen more than 80%, within the framework of a bullish streak that seems to have no end in the short term”, he explained.
According to Rava Bursátil, during the day, the shares that saw the sharpest gains were Banco Supervielle (SUPV), up 14,50%; Banco Macro (BMA), which is poised to buy the Itaú subsidiary, and which climbed 12.42%, and Grupo Financiero Galicia (GGAL), up 12.23%.
Colombia’s Colcap (COLCAP) registered strong gains in the midst of a political crisis that puts a strain on Gustavo Petro’s government and the reforms he wanted to push through in the short term. A reason for optimism for Colombian market operators, in fact, is that the delay in the reforms will allow the pension and health sectors, among others, to be less pressured by the potential regulatory changes that Petro’s presidency intended to promote and which were criticized by the private sector.
Shares of Corporación Financiera Colombiana (PFCORCOL) gained 8,33%, while those of Bancolombia (PFBCOLO) rose 7.16%.
Brazil’s Ibovespa (IBOV), Mexico’s S&P/BMV (MEXBOL) and Chile’s IPSA (IPSA) gained 1.70%, 1.67% and 1.06% respetively.
🗽On Wall Street:
US stocks gained Tuesday as a rotation into financial shares bolstered hopes the breadth of the S&P 500′s recent rally might extend beyond technology soon.
The benchmark index rose 0.2% as a decline in Apple Inc.’s stock took the air out of a tech rally, but shares of beaten-down regional banks were higher. The KBW Regional Bank index added 5.4% while the Russell 2000 gained 2.7%.
“It’s too early to say if this is bottom-fishing or a real bet that the most economically sensitive stocks — many of which are unprofitable — are the place to be,” said Steve Sosnick, chief strategist at Interactive Brokers. “But the outperformance that we saw in RTY on Friday and today is very much worth watching because it could explode the narrowing breadth concerns.”
The S&P 500 is on the edge of a bull market. However, the mood across global markets has been cautious with some questioning if markets have run up too fast on the hype for artificial intelligence.
For a second time in three days, the Russell 2000 has beat the tech-heavy Nasdaq 100 by at least 2.5 percentage points. Not since November 2020 have small-cap stocks scored frequent, big wins like this.
Among the biggest gainers for financial stocks were Comerica Inc. (CMA), up 7.14%; Fifth Third Bancorp (FITB), up 5,06% and Zions Bancorp (ZION), which climbed 4.87%.
“It’s easy to think about tech as a proxy for equities overall,” said Michael Reynolds, vice president of investment strategy at Glenmede. But “if we were to see a broader expansion of the breadth in the market, that would be confidence in the economic picture showing up.”
The World Bank said in a report Tuesday the global economy is in a precarious situation as sharp interest-rate hikes hit activity and stir vulnerabilities in lower-income countries. Those fears have suppressed equities. But with the rate of US inflation still high, traders increasingly expect the Federal Reserve will hold rates steady at its June meeting, while keeping the option for hikes later on open. Former vice-chair Richard H. Clarida also said Tuesday it was unlikely the US central bank will start cutting rates until 2024.
“I just think there are so many investors out there who are so negative,” said Sam Stovall, chief investment strategist at CFRA. Typically, stocks rise after a Fed pause, “implying that if we don’t eclipse or close above that 20% threshold [of a bull market] beforehand, that we probably would do so shortly thereafter.”
Also boosting sentiment is a growing number of advisers who don’t think equities will be hurt much by Treasury’s needs following the debt ceiling suspension.
“There was a risk that issuance was going to come faster, and that it might have drawn more cash away from risk assets, but I am less concerned about that now,” Thomas Simons, senior economist at Jefferies, said.
A Treasury bill auction announcement weighed on short-dated Treasuries on Tuesday while the 10-year note was little changed.
In commodities, oil gave up gains off news of Saudi Arabia’s supply cut, sending energy stocks including Chevron Corp. lower.
Wheat surged after Ukraine said Russian forces blew up a giant dam in the country’s south. And gold was little changed.
In Europe, the euro weakened and German bonds gained after the European Central Bank said euro-area consumer inflation expectations eased significantly in April.
Australia unexpectedly hiked on Tuesday and kept the door open to further increases, sparking a rally in the country’s currency.
And in Turkey, the lira dropped for an 11th day, on track for its longest run of losses in more than a year, amid speculation of less government intervention in markets.
On the currency markets, the Bloomberg Dollar Spot Index was little changed, the euro fell 0.2% to $1.0693, the British pound was little changed at $1.2426 and the Japanese yen was little changed at 139.68 per dollar.
🍝 For the dinner table debate:
New projections for Latin America: the World Bank published this Tuesday the update of its global economic outlook for 2023 and the following annual periods, anticipating that Latin America and the Caribbean will grow 1.5% at the end of this year -in April it expected 1.4%- and improving projections for some countries in the region.
This was the case of Mexico: the country could see growth of 2.5% this year according to the organization, when until April it was projecting an expansion of 1.5%.
The projection for Brazil is also more optimistic and is seen growing 1.2% in 2023 (two months ago the World Bank believed it would grow 0.8%).
Likewise, the outlook for Colombia’s economy improved: a growth of 1.7% is forecast for the Colombian economy when in April it was expected to have an expansion of 1.1% in 2023.
Another similar case is Chile, where until very recently economic activity was expected to fall 0.7% in the year: now this negative forecast has been cut to a 0.4% decline.
In contrast to better prospects for large Latin American economies, Argentina remains in a complex situation: the World Bank expects Argentina’s GDP to fall 2% over the course of this year, when until two months ago it expected 0% growth. Until the end of last year, the country was expected to have an economic growth of 2%. In the case of Peru, the WB expects the economy to grow 2.2%, 0.2 percentage points less than what it expected in April for the Andean nation.
Paola Villar S., a content producer at Bloomberg Línea, and Isabelle Lee, Carly Wanna and Vildana Hajric of Bloomberg News, contributed to this story.
