A roundup of Tuesday’s stock market results from across the region
👑 Latin America’s Leader:
Against the backdrop of a strong showing by US shares on Tuesday, Latin American markets had a mixed performance. On the upside, Mexico’s stock market posted the biggest gains, with the S&P BMV/IPC (MEXBOL) rising due to shares in the financial and real estate sectors rising, and which also benefited from the better mood in the U.S. market.
The S&P BVL/Peru (SPBLPGPT) closed up 0.42% thanks to gains in the raw materials and financial sectors.
The performance of the shares of Minas de Buenaventura (BVN), Credicorp (BAP) and Sociedad Minera Cerro Verde (CVERDEC1) stood out in the session.
📉 A Bad Day:
The Colombian stock market (COLCAP) saw the sharpest drop in Latin America, following the uncertainty generated in the market after the election of leftist Gustavo Petro as president on Sunday, with markets closed for a holiday on Monday.
The main Colombian index slipped 3.82%, which was not only the largest drop among the world’s main stock markets, but also the largest setback for the COLCAP since 2020.
Shares of oil company Ecopetrol (ECOPETL) were the hardest hit by the drop, and accumulated a decline of more than 10%. President-elect Petro has said he intends to cancel new oil exploration to promote a transition to clean energy.
The oil company’s drop was the highest since 2020. Other stocks such as Mineros (MINEROS), Grupo Sura (GRUPOSUR) and ISA (ISA) also closed with losses.
According to Orlando Santiago, manager of Fénix Valor, Tuesday’s performance of the Colombian stock market was exclusively due to the presidential election results.
🗽 On Wall Street:
US equities rebounded Tuesday after last week’s rout erased nearly $2 trillion from the S&P 500. Treasuries retreated.
The S&P 500 added 2.4%, led by energy and consumer discretionary shares, while the tech-heavy Nasdaq 100 (CCMPDL) surged 2.5% following the long weekend.
Revlon Inc. gained 62% in the wake of its Chapter 11 bankruptcy filing, Kellogg Co. was up 2.0% after plans to separate into three companies, and a basket of the most-shorted rose 2.7%. The drop in Treasuries took the benchmark 10-year yield back to 3.3%.
Sentiment this week is being helped by comments from President Joe Biden that a US recession isn’t “inevitable,” but the outlook remains parlous for investors weighing whether the market has bottomed. History suggests bear markets usually take time to find a floor, especially when they are accompanied by a recession, as happened in 2008′s financial crisis. Richmond Federal Reserve President Thomas Barkin said the US central bank should raise interest rates as fast as feasible in order to quell rampant inflation.
“We could likely skirt recession, almost touch it but not quite, because we think that the Federal Reserve has become much more sensitive to the effects of their actions on the economy, both in terms of employment and in terms of stability,” John Stoltzfus, chief investment strategist at Oppenheimer, said in an interview. “We’re not out of the woods yet, but we think we’re walking in the right direction.”
After unexpectedly accelerating to a fresh 40-year high in May, US consumer price growth is seen slowing, with a Bloomberg survey of economists predicting 6.5% by the fourth quarter and to 3.5% by the middle of next year.
Yet fears are increasing that Fed policy makers intent on cooling price pressures will go too far and trigger an economic slowdown.
Shares must still rule out a risk of recession, and may still fall more, according to analysts at Morgan Stanley (MS) and Goldman Sachs (GS).
“Central banks are facing a growth-inflation trade-off. Hiking interest rates too much risks triggering a recession, while not tightening enough risks causing unanchored inflation expectations,” strategists at BlackRock Investment Institute including Jean Boivin said in a note. “It’s tough to see a perfect outcome.”
Bitcoin scaled $20,000 as cryptocurrencies got a reprieve from recent turbulence. The dollar was little changed and the yen hovered near a 24-year low, sapped by the contrast between a super-dovish Bank of Japan and a hawkish Fed.
🔑 The Day’s Key Movements:
Oil prices rose on Tuesday, although the two main benchmarks, WTI and Brent, have yet to return to $120 per barrel.
Leading trader Vitol Group said Chinese demand is picking up in a market struggling to increase supply, meaning prices are unlikely to fall, Bloomberg reported.
The market also benefited from Biden’s comments that a US recession was avoidable.
“I was talking to [former Treasury Secretary] Larry Summers this morning and there’s nothing inevitable about a recession,” Biden told reporters Monday.
WTI crude should easily hold above the $100 level throughout the summer in the U.S., according to Oanda analyst Edward Moya.
🍝 For the Dinner Table Debate:
During his participation in the Qatar Economic Forum, organized by Bloomberg, Elon Musk talked about everything from his intention to buy Twitter (TWTR) and layoffs at Tesla (TSLA) to his vision of the US economy.
Musk assured that there are still “unresolved issues” in the deal to buy the social network, but said he hopes to boost the number of users on the platform without necessarily being the company’s CEO.
“There is the question of whether the debt portion of the round will be raised and then whether shareholders will vote in favor,” he said.
Musk also during his speech that he had a “super bad feeling” about the performance of the US economy in the coming months, and added that a recession will be inevitable, Bloomberg reported.
Regarding the job cuts at Tesla, he estimated that they will cause an overall reduction of around 3% to 3.5% in the company’s total workforce.
-- Carlos Rodríguez Salcedo, a content producer for Bloomberg Línea, and Enrique Roces Gonzalez and Isabelle Lee, of Bloomberg News, contributed to this report