Argentina’s Merval Index Soars; Big Tech Stocks Push Nasdaq to Year-to-Date High

The Merval index climbed 4.54% on Thursday, while the NYSE notched up four straight days of gains

Bolsa de Valores de NY
By Bloomberg Línea
July 13, 2023 | 11:00 PM

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A roundup of Thursday’s stock market results from across the Americas

🌎 Argentina’s Merval index gains 4.54%:

Latin American stock markets continued to be infected by the optimism in the United States and made gains, for the most part, except for a slight correction presented by Chile’s IPSA (IPSA), which fell 0.27%, but remained above 6,000 points.

Argentina’s Merval (MERVAL) once again led the gains of the regional stock exchanges, with a 4.54% advance, and with an outstanding performance of Empresa Distribuidora Y Comercializadora Norte (EDN), which rose 9.7%.

The spokeswoman for the International Monetary Fund (IMF), Julie Kozack, stated on Thursday that countries can use five currencies to settle their obligations with the organization, and that among them is the Chinese yuan, giving a ‘wink’ to Argentina, which used this currency to pay part of the US$ 2.7 billion due to the organization in June.

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IMF Hints at Argentina Paying Off Debt In Yuan

Sura Financial said Thursday that it plans to double within five years the assets under management in its investment unit, which is being reformulated, as reduced political risks and impending interest rate cuts help stimulate foreign investment. “I see Chile much better than it was two years ago and I see it in two years better than it is today,” said the financial firm’s general manager, Pablo Sprenger.

Likewise, Brazil’s Ibovespa (IBOV) and the S&P/BVL Peru (SPBLPGPT) added gains of 1.36% and 1.07%, respectively.

A unit of state-owned China Minmetals Corp. is facing further delays in the construction of a second pit at the Las Bambas copper mine in Peru, it was reported Thursday, as the project to mitigate the depletion of the current pit was scheduled to start in the second half of the year.

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The Mexican Stock Exchange S&P (MEXBOL) was up 0.53% and Colombia’s Colcap (COLCAP) 0.94% in trading on Thursday.

🗽On Wall Street:

Wall Street got an extra dose of encouragement to bid up stocks after another inflation report reinforced bets the Federal Reserve is approaching an interest-rate peak.

All of a sudden, disinflation becomes the buzzword across trading desks, with investors looking on the bright side of data showing a slowdown in prices — even though core inflation is still running above the central bank’s 2% target. Equities gained further traction on news that Fed Bank of St. Louis President James Bullard — who called for aggressive hikes — has resigned.

Tech megacaps led gains on Thursday, with the S&P 500 topping 4,500 and the Nasdaq 100 up over 1.5%. Amazon.com Inc. hit a 10-month high after reporting record sales during its Prime Day sale. Google’s parent Alphabet Inc. rallied about 4.5%. Banks also gained ahead of results from JPMorgan Chase & Co., Citigroup Inc. and Wells Fargo & Co. Two-year yields fell 11 basis points to 4.64%. The dollar dropped for a fifth straight day.

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The producer price index for final demand rose 0.1% in June from a year earlier, the smallest advance since 2020. The figures came just a day after data showed consumer prices increased at the slowest pace since 2021.

“The disinflation narrative is in full effect,” said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance. “It does appear that inflation is coming down across the board, and although the Fed is still likely to raise rates again at the end of this month, there is a very strong possibility that they are done raising rates for the year.”

The recent economic figures have sent clear signals that the Fed’s policy is working, but it’s possibly too early to claim victory against inflation, according to Fiona Cincotta, senior market analyst at City Index.

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“If I had to choose a camp, I would probably go in the two rate hikes to come – July and possibly another one later in the year,” Cincotta added. “And I think that there will be a growing number of Fed officials who will be questioning whether more rate hikes are actually needed after July.”

Fed Bank of San Francisco President Mary Daly told CNBC Thursday that it’s too soon for policymakers to say they have done enough to return US inflation to their target. While the latest consumer-price report “is very positive,” the official said she’s in a “wait-and-see mode on that, because I remain resolute to bring inflation down to 2%.”

Aside from the economic debate, traders also awaited the unofficial start of the second-quarter earnings season Friday.

The focus is going to be mostly on the corporate outlooks given that beating profit expectations seems to be a low hurdle — even as some estimates have started to rise slowly.

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Goldman Sachs Group Inc. strategists expect US companies to be able to meet the low bar set by consensus. And Bloomberg Intelligence strategist Gina Martin Adams says “the S&P 500 earnings season will likely reveal more of the ‘less bad than feared’ trend that emerged in 1Q.”

“The thing I’m focusing on in the market, of course, is earnings, to see where the numbers come in, to try to get a gauge on how companies are doing, and really what they’re forecasting going forward,” said Chris Gaffney, president of world markets at TIAA Bank.

In other corporate news, Delta Air Lines Inc. said it will make more money this quarter than Wall Street anticipated as it reported better-than-predicted results for the prior three months. PepsiCo Inc. raised its sales and earnings estimates once again after a strong quarter. Exxon Mobil Corp. agreed to buy Denbury Inc. for $4.9 billion, its biggest acquisition in six years.

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  • The Bloomberg Dollar Spot Index fell 0.7%
  • The euro rose 0.9% to $1.1226
  • The British pound rose 1.1% to $1.3133
  • The Japanese yen rose 0.3% to 138.02 per dollar

🍝 For the dinner table debate:

An unprecedented rise in Latin America’s currencies is reviving the market for local currency bonds sold to foreign investors in search of yield.

So far in 2023, governments and companies have sold US$ 7.3 billion in local currency bonds in global debt markets, according to information compiled by Bloomberg. This amount exceeds the US$ 1 billion in 2022. This boom, led by sales in Peru, Chile and the Dominican Republic, represents the largest on record since 2019.

“There is growing demand for l ocal currency assets, particularly in Latin America,” said Akbar Causer, a money manager at Eaton Vance Management specializing in emerging market corporate debt. “Latin American local assets have been some of the best performers so far. This is driven by both currencies and interest rates.”

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The increase in issuance is due to global investors chasing assets that still benefit from high interest rates in the region, which is favored by the early implementation of tighter monetary policy by its central banks, especially in contrast to the slow reaction of the Fed and other monetary agencies.

Sebastián Osorio Idárraga and Paola Villar S, content producers at Bloomberg Línea, and Rita Nazareth of Bloomberg News, contributed to this report.