A roundup of Friday’s stock market results from across the Americas
👑 Argentina’s Merval continues to lead in LatAm:
On Friday, Latin America’s main stock exchanges closed the day in the green for the second consecutive day. Argentina’s Merval (MERVAL) and the S&P/BMV IPC (MEXBOL) led the session’s gains among their peers in the region.
The Argentine stock market closed with an increase of 1.98%. The good performance of Grupo Financiero Galicia (GCAL), Banco Macro (BMA) and Loma Negra (LOMA) shares boosted the Merval’s performance.
“The Merval continues its upward march and exceeds 210,000 points, reaching a new historical high. The local stock market index has an accumulated growth of over 160% in just over six months, making the upward trend stronger and stronger,” said Mauro Natalucci, account executive at Rava Bursátil.
On the other hand, the Mexican stock market ended the session with a gain of 1.82%, driven by the good performance of the finance, industry and materials sectors. Grupo Carso (GCARSOA1), Orbia Advance (ORBIA*) and Controladora Vuela (VOLARA) shares were among those that led the day’s gains.
Mexico’s Economy Ministry announced Friday the issuance of a new decree to extend to December 2023 the validity of the anti-inflation package implemented by the government of President Andrés Manuel López Obrador since last year in an attempt to keep the prices of basic products stable.
The ministry said that it was decided to continue with the measures as part of the anti-inflationary policy and because there is still an international context with a generalized rise in prices. The extension of the package consists of temporary exemption from the payment of tariffs on the definitive importation of various food products, personal hygiene products, animal feed and agricultural inputs, in order to counteract the escalation of prices during 2023, the ministry stated in a press release.
🗽On Wall Street:
US stocks had their best day in more than a month as traders speculated that a slowdown in wage growth will keep the Federal Reserve from having to intensify its battle against inflation. Treasuries rallied and the dollar dropped.
The S&P 500 jumped more than 2% to salvage the first weekly advance in the past five, while the Nasdaq 100 rose 0.9% in the four days. The dollar suffered its longest streak of weekly losses in two months as cooler wage growth outweighed an otherwise solid jobs report to fuel expectations the Fed will slow its pace of rate hikes.
The S&P 500 climbed 2.28%, its best gain in more than three weeks, while the Nasdaq Composite (CCMPDL) gained 2.56% and the Dow Jones Industrial Average 2.13%.
Treasuries advanced Friday, with sharp declines in short-term yields where the policy-sensitive, two-year rate fell the most this week since November.
The eagerly anticipated December jobs report failed to offer a clear picture of the state of the American labor market, especially since it came a day after two jobs readings signaled continued tightness. Hiring exceeded estimates for the month and unemployment fell to the lowest in decades. Traders continued to mull how that strength contrasts with the weaker gains in hourly wages and what that means for Fed policy ahead. A reading on conusmer prices is due next week.
“A new 53-year low in the unemployment rate is a real problem, suggesting the Fed made zero progress toward relieving labor market strain in 2022,” wrote Chris Low, chief economist at FHN Financial. “But the combination of the downward revision to November average hourly earnings and a lower-than-expected December rise buys the FOMC more time.”
Recent data only complicates the central bank’s task and creates uncertainty for traders. Kansas City Fed’s Esther George, on Friday, warned that officials will have a tough road ahead as they attempt to balance inflation and employment. Other Fed officials have also continued to be hawkish, saying that while data has been encouraging and inflation is easing, the central bank still has more work to do.
Swaps contracts show investors now expect the policy rate to peak at under 5% this cycle, down from 5.06% just before Friday’s jobs report. While traders remain divided about the size of February’s hike, with 33 basis points of tightening priced in it appears that a quarter-point move is seen as more likely than a half point increase.
Traders are now awaiting December’s inflation reading that releases next week for further clues about the economy.
“It seems like good news is good news, for a change,” Mike Bailey, director of research at FBB Capital Partners, said. “Sometimes a hot jobs number is bad news, but investors are seeing the glass half full this morning. Lower wages are pouring cold water on Jay Powell’s plans for more tightening. I would broaden the conversation to add lower-than-expected inflation in Europe and a down market for stocks this week. Put these together with lower US wages and you get a narrative that stocks are cheap, inflation is fading, and investors need to get busy filling out their portfolios before it’s too late,” he added.
For her part, Lisa Erickson, senior vice president and head of public markets group at US Bank Wealth Management, said: “The Fed is indicating a keen interest in seeing the labor market normalize. So, as long as we continue to see strong and robust labor growth, that again provides more opportunity for the Fed to overtighten as it goes over time because it’s really trying to bring that part of the economy to more of a slowdown.”
On the currency markets, the Bloomberg Dollar Spot Index fell 1.1%, the euro rose 1.2% to $1.0644, the British pound rose 1.6% to $1.2094 and the Japanese yen rose 1% to 132.08 per dollar.
🔑 The day’s key events:
Oil posted big losses in the first trading week of the new year as uncertainty over demand continues to weigh on the market. Today, crude oil wobbled after US jobs data held back the dollar.
West Texas Intermediate closed in positive territory, but settled below $74 a barrel, posting its biggest weekly loss in a month at more than 8.1%. On the other hand, Brent settled at $78.51 a barrel for March delivery.
Yesterday, Saudi Arabia cut the prices of crude oil it sells to Asia and Europe, an indication of concerns about the short-term outlook. In addition, China is battling a Covid-19 outbreak following the lifting of restrictions on its Covid Zero policy.
Crude’s weak start to the year comes as the International Monetary Fund (IMF) warned that the global economy could be in recession by 2023, while Federal Reserve officials signaled during the week that US interest rates were still not tight enough.
🍝For the dinner table debate:
After a year marked by distortions caused by the war in Ukraine and extreme weather conditions, global food commodity prices ended 2022 almost where they started.
Soon after Russia’s invasion of Ukraine, essential supplies of grains and vegetable oils from the breadbasket of the world came to a standstill, and the UN food and commodity index recorded an unprecedented rise in March. Subsequently, prices fell as a pact to export Black Sea crops and other good crops underpinned supply, then stabilized by the end of 2022.
According to a UN Food and Agriculture report, the index, which assesses 5 major food essentials, declined by 1.9% during last December. This brought losses for the year to 1%, the first annual decline since 2018.
However, prices are well above the average of the past 10 years, contributing to the global cost-of-living crisis and exacerbating a famine that the United Nations has set out to eradicate by the end of the decade. In 2022, the index average was 14% higher than in 2021.
Leidys Becerra, a content producer at Bloomberg Línea, and Emily Graffeo and Vildana Hajric of Bloomberg News, contributed to this report.