A roundup of Monday’s stock market results from across the region
👑 Chile leads in Latin America líder:
In Latin America, Chile’s Ipsa (IPSA) was the best performer on Monday, gaining 2.23%, with the materials and utilities sectors performing the best.
Chile is on course to lead the world next year in cutting monetary policy rates, according to Bloomberg, based on what the interest rate swaps market reveals. These instruments show market traders are discounting more than five percentage points in cuts over the next 12 months after weak economic data and lower-than-expected inflation figures. Only one nation, Hungary, would make similar cuts.
Meanwhile, Brazil’s Ibovespa (IBOV) and Mexico’s S&P/BMV IPC (MEXBOL) also reported slight gains on Monday, of 0.81% and 0.41%, respectively.
The results in Brazil came despite the fact that Morgan Stanley is moving away from the country’s stock market due to the risk that President-elect Luiz Inácio Lula da Silva’s appetite for higher spending could spoil expectations of interest rate cuts next year.
📉 A bad day for Colombia’s COLCAP:
Colombia’s Colcap (COLCAP) and Peru’s S&P/BVL (SPBLPGPT) had the worst performance in the region, down 3.99% and 0.04% respectively,
In Colombia, Nutresa shares (NUTRESA) sank 28.75% after IHC rejected an offer to buy the Colombian food producer. IHC, which paid $15 per share, only obtained 7.71% of Nutresa in the takeover bid, while the minimum they were seeking was 25% of the company.
In view of this, Bloomberg Línea was able to confirm with lawyers close to the bankers of GNB Sudameris (the Gilinski family) that the next step will be the filing of criminal lawsuits against several of those involved in the failure of the takeover bid, since they were unable to sell their shares to IHC.
Meanwhile, the preferred shares of Grupo Sura (GRUPOSUR) also suffered this Monday with a fall of 4.88% on the Colombian Stock Exchange (BVC).
The Argentine stock exchange remained closed for a holiday on Monday.
🗽 On Wall Street:
US stocks dropped as investors parsed comments from Federal Reserve officials who broadly remained steadfast in their fight against inflation. Mounting concerns that China may tighten Covid curbs after a string of reported deaths also continued to weigh on investors.
Technology stocks, which are typically more sensitive to interest rates, dragged the S&P 500 lower. The Nasdaq 100 ended the day down 1.1%. Oil emerged from a volatile session largely unchanged after Saudi Arabia denied a report that it is discussing an oil-production increase for the OPEC+ meeting next month. The dollar climbed for a third day as investors sought haven assets. Treasuries were mixed.
The Nasdaq Composite (CCMPDL) dropped 1.09%, while the S&P 500 dropped 0.39% and the Dow Jones Industrial Average 0.13%.
Investors are closely watching what Fed speakers say about the outlook for interest rates. While several central bank officials in recent days have restated their intention to remain relentless until inflation is under control, they differ on how far they’ll go.
On Monday, San Francisco Fed President Mary Daly said that officials will need to be mindful of the lags with which monetary policy is transmitted through the economy as they raise rates further. Her Cleveland counterpart Loretta Mester said she’s open to slowing the tempo of rate hikes.
“This shouldn’t be regarded as a pivot or anything new,” said Michael Contopoulos, director of fixed income at Richard Bernstein Advisors. “A real pivot is when the Fed starts to cut rates and/or pause quantitative tightening. That is nowhere in sight.”
Atlanta Fed President Raphael Bostic, meanwhile, has said he favors slowing the pace of interest rate increases, with no more than 1 percentage point more of hikes, to try to ensure the economy has a soft landing. Boston Fed President Susan Collins has reiterated her view that options are open for the size of the December interest-rate increase, including the possibility of a 75 basis-point move.
Traders this week will also be looking to minutes of the most recent Fed policy meeting for further clues on the central bank’s path ahead.
“For the Fed right now, if we do get some slowing in inflation -- which it seems like we might -- but you’re not seeing it in the slowing of service inflation, that’s related to a tight labor market,” Veronica Clark, economist at Citigroup, said on Bloomberg Television. “You do need to see that loosening in the labor market data.”
Meanwhile, China saw its first Covid-related death in almost six months on Saturday and another two were reported on Sunday. Worsening outbreaks across the nation are stoking concerns that authorities may again resort to harsh restrictions. Shutdowns could have a negative impact on supply-chain dynamics and possibly exacerbate inflation issues across economies.
On the currency markets, the Bloomberg Dollar Spot Index rose 0.7%, the euro fell 0.8% to $1.0239, the British pound fell 0.6% to $1.1818 and the Japanese yen fell 1.2% to 142.11 per dollar.
🔑 The day’s key events:
Oil suffered another day of losses, this time driven by the debate that Saudi Arabia and other OPEC members are having about an increase in supply, and also by the fact that China is intensifying its policies against Covid-19, affecting demand forecasts.
Brent dropped below $85, a price not touched since September, and then recovered to close at $87.79, with a brief advance of 0.19%. Meanwhile, West Texas Intermediate dropped 0.44% to $79.73.
The increase in crude oil production proposed by Saudi Arabia is of 500,000 barrels, in anticipation of Russia’s crude oil embargo by the European Union, so that the increase in supply would take place in a context of a market turnaround. However, Saudi Arabia denied the report and added that “the current cut of two million barrels per day by OPEC+ continues until the end of 2023″.
Last Friday, oil prices had recorded their biggest weekly drop since April.
🍝 For the dinner table debate:
Russia does not plan to supply oil and oil products to countries that implement a price cap, according to Deputy Prime Minister Alexander Novak.
Instead, Russia will redirect its oil supplies to “market-oriented partners” or reduce its production, Novak said in a statement.
Novak’s reiteration of his country’s stated position comes in the run-up to the G7′s intended announcement Wednesday of the level at which they intend to set a price cap on Russian oil. The cap, which is also backed by the European Union, would prohibit companies from providing services, such as transportation and insurance, for shipments of Russian oil anywhere in the world unless it is sold below the agreed limit.
The EU plans to ban maritime imports of Russian crude oil from December 5 and purchases of petroleum products from the country from February 5.
Sebastián Osorio Idárraga, a content producer at Bloomberg Línea, and Peyton Forte and Emily Graffeo of Bloomberg News, contributed to this report.