Fears that higher world inflation will cause central banks to raise their interest rates, strongly affecting economic growth, together with the challenges of Argentina for the coming months caused a strong selling trend due to unwinding of asset positions.
On the New York Stock Exchange, local papers registered widespread declines, which reached double digits, such as Despegar (-12%), or Supervielle (-10.1%). The assets of Mercado Libre (-9.4%), Cresud (-9.1%), Transportadora de Gas del Sur (-8%), Galicia (-7.9%); and Central Puerto (-7.2%) The stock that suffered the least on the day was Bioceres (-0.2%).
“The aversion to global risk is hitting squarely on the dynamics of domestic assets, having no choice but to accompany them with weakness since they must also withstand political noise and local economic uncertainty, for which the threats of premature electoral ‘trade ´ they are quickly evaporated by the negative flows”, commented a market analyst.
Wall Street’s main stock indices plummeted, with the S&P500 already in a bear market, for him fear that aggressive interest rate hikes by the Federal Reserve will push the economy into recession.
The Dow Jones lost 2.8%, the technological Nasdaq 4.7% and the S&P 500 of the largest companies on the stock market lost 3.9%.
The S&P is more than 20% below its closing all-time high on January 3, as worries about inflation, rate hikes and the Ukraine war are pushing it into bear market territory for the second time since Wall Street’s pandemic-driven slump in 2020.
A higher-than-expected inflation data on Friday led traders to pricing in a total of 175 basis points (bps) in rate hikes for September, with many expecting a higher-than-estimated 75 bps hike on June 15. “There are flashing yellow lights everywhere, and maybe red too, suggesting that inflation is going to be around for some time,” said Chris Campbell, chief strategist at Kroll in Miami.
The two-year US Treasury yield curve briefly inverted for the first time since April. a move seen by many in the market as a reliable sign that a recession could come in the next year or two.
In the Argentine stock market, for its part, BYMA’s S&P Merval fell 1.4% to 87,937.89 units, sustained by the rise in the CCL dollar (+4.6%), after losing almost 3% last week, led by services papers, energy and financial.
The most important casualties were recorded in the papers of Northern Gas Carrier (-8.2%); Cablevision (-5.4%); and Supervielle (-3.3%).
In the fixed income segment, meanwhile, sovereign bonds denominated in dollars they returned to record lows, losing up to more than 4%, after a week shaken by the liquidation of securities in local currency tied to inflation. The falls were led by the Global 2030 (-4.3%); Overall 2038 (-4.2%); and Bonar 2038 (-4.1%).
“For bonds in dollars there is no interest, which is why it is a totally closed market. Only the bonds that adjust for inflation remained, but now they are also a bit closed,” commented an economist.
Thus, the argentine country risk made by JP.Morgan bank soared 3.6% to 2,117 units, after climbing intraday to 2,124 points, a record since September 2020, after a million-dollar private foreign debt swap.
In the peso segment, in turn, CER bondsheavily punished last week, ended with the majority of casualties, which reached 2.5% (Par and Boncer 2026), after a slightly bullish start.
For the economist Gustavo Ber, “The sudden selling pressure on the CER securities could complicate the next debt auctions where they must face challenging roll-overs, since otherwise there would be no other alternative than to deepen monetary financing, with inopportune adverse effects on inflation and financial stress”.
“The main thing is to see if the debt market in pesos is closed to the Government or they will be able to issue debt at reasonable rates. If it is closed, the macroeconomic deterioration is going to be very high, since the program with the IMF becomes unfulfillable and the alternatives would be very expensive,” said Roberto Geretto of Fundcorp.
He added that “In this scenario, before a maturity, the alternatives are to issue to be able to face it (more inflation), reshape the debt (affects the solvency of investment funds and banks) or use banking liquidity via regulations (increases banking risk and can generate a run)”.
Argentina and the IMF closed a credit program last March for some 44,000 million dollars by which the country promised to increase the reserves of the Central Bank (BCRA), lower inflation and cut subsidies to reduce the deficit, among other points. “The margins are shrinking for the Government. It was expected that these problems would be more visible next year, but the markets are always ahead”said Daniel Artana, Chief Economist of Fundación Fiel. “Everything seems to indicate that in this first year of the program it will not meet any of the three goals,” he added.
Source: Ambito
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