A roundup of Wednesday’s stock market results from across the region
📉 A bad day across the Americas:
Risk aversion generated by expectations of higher interest rates continues to hit Latin American stock markets. On the last day of August, none of the region’s main stock markets managed to close with gains.
Argentina’s Merval (MERVAL) saw the sharpest losses in Latin America for the second day in a row, dragged down by shares of Grupo Supervielle (SUPV), Banco BBVA Argentina (BBAR) and Aluar Aluminio (ALUA), which had the sharpest falls.
The possibility of lower economic growth also hit Brazil’s Ibovespa (IBOV) and Mexico’s S&P/BMV IPC (MEXBOL), on a day of losses for the main commodities, In Mexico, investors received forecasts from the central bank, which maintained at 2.2% its growth estimate for the close of 2022, but for next year cut its forecast to 1.6% from a previous one of 2.4%.
Colombia’s COLCAP index (COLCAP) fell more than 3% amid risk aversion and due to the rebalancing of stocks that was scheduled for the index.
🗽 On Wall Street:
US stocks and bonds ended a turbulent August lower as traders recalibrated rate-hike expectations after central banks across the globe vowed to step up their fights against inflation.
All major US indexes had their worst month since June. Treasuries in August faced their biggest monthly loss since April as the Federal Reserve resolved to stay hawkish. Oil posted a third monthly drop -- the longest losing streak in more than two years -- hampered by the likelihood of slower global growth.
The S&P 500 closed with losses for the fourth consecutive day, down 0.78%, the Dow Jones Industrial Average dropped 0.88% and the Nasdaq Composite (CCMPDL) 0.56%.
Federal Reserve officials in recent days quashed hopes of a dovish pivot, a view that had helped fuel bets that this year’s bear market is over. Since then, investors have been sifting through sometimes-conflicting economic data for further policy clues. While job openings data on Tuesday underscored tightness in the labor market, revamped ADP data on Wednesday showed US companies increased headcount at a relatively sluggish pace in August. All eyes will be on the job report on Friday for further hints about the central bank’s path.
“Now that the Jackson Hole dust is settling, markets have gained clarity on today’s investment question,” said Florian Ielpo, head of macro research at Lombard Odier Asset Management.
“Yesterday’s question was ‘will inflation level down’ when today’s is ‘how big will the needed slowdown be.’ For now, markets are pricing a marked slowdown, not a fully-fledged recession,” he added.
The Fed has ditched its soft-landing goal and is instead aiming for a “growth recession,” which would mean a protracted period of meager growth and rising unemployment.
Euro-area inflation accelerated to another all-time high, strengthening the case for the European Central Bank to consider a jumbo interest-rate hike when it meets next week. ECB Governing Council member Joachim Nagel urged a “strong” reaction. Money markets have now priced in 125 basis points of tightening from the ECB by October, which implies a half-point hike and a three-quarter point increase spread over its next two policy decisions.
Investors are also contending with mounting friction between Beijing and Taipei after Taiwanese soldiers fired shots to ward off civilian drones and evaluating the latest Chinese data, which indicated factory activity shrank for a second month. Power shortages, a property sector crisis and Covid outbreaks all took a toll.
On the currency markets, the Bloomberg Dollar Spot Index was little changed, the euro rose 0.3% to $1.0049, the British pound fell 0.3% to $1.1616, and the Japanese yen was little changed at 138.91 per dollar.
🔑 The day’s key events:
Oil prices continued their downward trend during the day and closed August with their third monthly decline, the longest losing streak in more than two years, as the market continues to be attentive to the possibility of lower growth hitting crude oil demand.
The bearish sentiment continues to be influenced by central banks’ monetary policy to control inflation, which will lead to a slowdown in the world’s largest economies.
These fears were compounded by signals coming from China, the world’s largest oil importer, indicating slower economic growth amid problems in the housing market and the effects of the anti-Covid-19 policy.
A Bloomberg survey projects that country’s economy will grow by 3.5% this year, down from the previous forecast of 3.9%. Growth projections for the first three quarters of next year were also lowered, Bloomberg reported.
“China’s PMI data confirms that the economy is weakening rapidly due to the impact of the Covid-19 shutdowns, intense heat waves, the worrisome real estate crisis and the persistence of the global energy crisis,” added Edward Moya, an analyst at Oanda.
🍝 For the dinner table debate:
Armando Benedetti, the new Colombian ambassador to Venezuela, said he is willing to implement a more relaxed tone in the relations between both countries and assured in an interview with Bloomberg Línea that he has been surprised by the citizen optimism of those who expect a reopening of the borders for the reactivation of trade.
The former senator spoke to Bloomberg Línea about the proposals he has presented, and when asked about the sanctions maintained by the US government against Venezuela, he said that he has already held meetings with economic counselors of the US embassies in Colombia and Venezuela, in search of solutions and reflections on the events.
He also revealed that a proposal for the prompt reopening of the Colombian-Venezuelan border was rejected by Venezuela’s Nicolás Maduro.
“I proposed to President Maduro that we should please do it as soon as possible, that I was proposing to lift the border in three or four months, he told me ‘no’. I told him: What are you worried about? He told me that the issues of drug trafficking, insecurity,” Benedetti said.
-- Carlos Rodríguez Salcedo, a content producer at Bloomberg Línea, and Vildana Hajric of Bloomberg News, contributed to this report.
