A roundup of Monday’s stock exchange results from across the Americas
🌎 Chile’s IPSA leads LatAm gains:
Latin America’s stock markets closed mixed on Monday. Chile’s IPSA (IPSA) climbed 0,67%, Argentina’s Merval (MERVAL) and Peru’s S&P/BVL (SPBLPGPT) each advanced 0.09%, while the Colombian stock exchange remained closed for a holiday.
Mexico’s stock exchange (MEXBOL) saw the sharpest losses in the region during the day, closing 1.53% lower, dragged down by the shares of Industrias Peñoles SAB (PENOLES) and Kimberly-Clark de México (KIMBERA), which fell 4.30% and 3.16% respectively.
Foreign direct investment in Mexico during the first quarter of the year equalled half of the full-year amount for 2022, as companies relocate to the country to take advantage of nearshoring, particularly from the manufacturing sector.
Brazil’s Ibovespa (IBOV) also closed lower, down 0.48% at closing, as commodity prices dropped and impacted the shares of Vale (VALE) and Petrobras (PETR4).
🗽On Wall Street:
US stocks fluctuated ahead of a crucial meeting between US President Joe Biden and Republican House Speaker Kevin McCarthy to iron out road blocks in debt-ceiling negotiations.
The S&P 500 drifted between gains and losses, gaining 0.02% at closing. Yields on short-term Treasuries rose. And the tech-heavy Nasdaq 100 (CCMPDL) advanced 0.5%, though chipmakers were under pressure.
China said products by Micron Technology Inc. failed a cybersecurity review. Meanwhile, Pfizer Inc. rose on a report its weight loss pill may be as effective as Ozempic. And Zoom Video Communications Inc. was higher in after-hours trading after raising its annual sales forecast.
The Dow Jones Industrial Average dropped 0.42%.
The big question on investors’ minds is whether US politicians will be able to reach a deal to raise the debt limit before the government runs out of money. Treasury Secretary Janet Yellen said the chances are “quite low” that the US can pay all its bills by mid-June.
“There is a lot of showmanship around the debt ceiling,” said Sarah Hewin, senior economist at Standard Chartered. “The closer we get to June 1 without a resolution, the greater the risk of an accident, so there is a lot of potential for markets to get concerned.”
Tech is at least one beneficiary in the meantime. Elyse Ausenbaugh, a global investment strategist at JPMorgan Wealth Management, said mega-cap tech already “went through that phase of retrenching and refocusing their businesses, and so investors are starting to gravitate there.” The Nasdaq 100 surpassed a 52-week high on Monday.
The debt ceiling is “all-consuming now,” wrote Chris Low, chief economist at FHN Financial. “But when Congress raises it, attention will return to the economy and the Fed.”
St. Louis Federal Reserve President James Bullard said he’s thinking of two more rate hikes this year, while Minneapolis Fed President Neel Kashkari said if the US central bank pauses next month it should signal tightening isn’t over.
Elsewhere, Greek markets were a bright spot. Sunday’s national election resulted in a strong showing for Prime Minister Kyriakos Mitsotakis, signaling investment-friendly policies can continue. The benchmark Athens Stock Exchange Index jumped to its highest level in almost a decade. Meanwhile, the Euro Stoxx 600 was little changed on the day.
Commodities were broadly weaker because of concern over China’s post-Covid economic recovery. Iron ore futures dropped on signs of disappointing steel demand from the construction sector. However, Asian equities ended higher after Biden hinted about improving relations with Beijing. His prediction that Sino-US ties would “begin to thaw very shortly” lifted Hong Kong stocks more than 1%.
The Bloomberg Dollar Spot Index rose 0.1%, the euro was little changed at $1.0811, the British pound fell 0.1% to $1.2432 and the Japanese yen fell 0.4% to 138.60 per dollar.
🍝 For the dinner table debate:
Both Argentina and Ecuador restructured their debts with private creditors in 2020, within the framework of the coronavirus lockdowns. They did it in very different ways: while Guillermo Lasso’s administration took three months and did it after a previous agreement with the International Monetary Fund, Alberto Fernández’s team took more than twice as long and without a previous deal with the IMF.
This difference caused both restructurings to have divergent paths: as an example, while Argentina closed 2022 with a country risk of 2,162 units, Ecuador closed at 1,255 basis points.
However, the political crisis faced by President Lasso in Ecuador -he has just dissolved the Assembly and called elections for executive and legislative positions, anticipating his impeachment- severely damaged sovereign bonds and, at this moment, Ecuador’s country risk stands at 1,857 points (against Argentina’s 2,596).
At this moment, both states have the second and third worst country risk in Latin America, since the first place is occupied by Nicolás Maduro’s Venezuela (35,587.91 units).
Sebastián Osorio Idárraga, a content producer at Bloomberg Línea, and Emily Graffeo and Vildana Hajric of Bloomberg News contributed to this report.
