NYSE stock futures rose at the close of a volatile week alongside their European counterparts after Chinese lenders lowered their five-year prime lending rate (to 5% from 4.45%) in an effort to boost loan demand, news that resonated with global markets as consumer and business confidence has been battered by Covid lockdowns amid a cooling real estate sector and falling home prices.
Rebounds in risk sentiment are likely to diminish this year as concerns about a potential economic recession, partly induced by the Fed's interest rate hikes, remain. In the United Kingdom, the rebound in April retail sales is attempting to restore sentiment after the sharp decline in consumer confidence (the lowest level in at least 48 years). In the latest developments regarding Russia's war in Ukraine, the Senate approved an aid package for Ukraine of more than US$40 billion and sent the bill to President Joe Biden for his signature. Meanwhile, the G7 will agree on more than €18 billion (US$19 billion) in aid for Ukraine.
In Colombia, banker Jaime Gilinski, after failing to achieve his recent goal of increasing his stake in Nutresa and Grupo Sura, changed tactics and is now targeting the cement and infrastructure conglomerate Grupo Argos. He is offering to buy a minimum of 26% and a maximum of 32,5% of shares for US$4.08 each. This offer is more than 20% above Argos's closing price of 13,540 pesos (US$3.3).
The DXY index gained 0.23% at the start of trading, bringing the currency to 102.965 units. It registered its largest one-day drop since early March yesterday, losing more than 1% on the day. The sharp decline in US Treasury yields is hampering demand for the greenback despite risk aversion. Markets remain relatively calm early Friday, but US stock index futures are trading higher, pointing to improved market sentiment heading into the weekend. The European Commission will release consumer confidence data for May later in the session. We expect narrow trading ranges between 102.5 and 103.3 during the session.
The Colombian peso (COP) advanced, appreciating 0.45% on Thursday, closing at $4,054 per dollar. This session saw the supply of foreign currency come from the hydrocarbon sector, while demand came from the real estate sector and the derivatives market. The pair's performance could be influenced on Friday by the decline in global risk sentiment. Additionally, the local currency could benefit from rising oil prices. In this context, we expect a narrow daily trading range between $4,020 and $4,070.
The Mexican peso (MXN) opens the day with a 0.26% decline, trading at 19.8626. The pair opened after appreciating on Thursday amid a global weakening of the dollar, resuming a winning streak that was interrupted the day before by increased demand for safe-haven assets due to concerns about inflation and the global economic recovery. Therefore, volatility has currently gripped the markets, and investors seem forced to get used to sessions of sharp movements, both upward and downward. In this context, we expect a narrow daily trading range between 19.977 and 19.74.
The Peruvian sol (PEN) opens the day with a 0.12% decline, trading at 3.7563. The pair opened after learning that Peru's country risk index closed yesterday at 1.77 percentage points, adjusted after the close, up three basis points from the previous session, according to the EMBI+ Peru index calculated by the investment bank JP Morgan. In this context, we expect a narrow daily trading range of 3.787–3.726.
The Chilean peso (CLP) opened the day appreciating 0.44%, trading at 850.05 Chilean pesos per dollar. This followed the announcement that President Boric had shifted his policy by militarizing the Mapuche-held territory in Chile. Furthermore, at the local level, the continued progress on the constitution, which is increasingly close to its final approval, has also been important. In this context, we expect a daily trading range of 839.581–826.839.
The Chinese yuan (CNH) opened the session with an appreciation, trading at 6.6883 yuan per dollar, with the USD/CNH declining 0.57%, following China's modest monetary easing, which triggered a rebound in short-covering in the United States. The gradual easing of lockdowns in the country is also a key factor determining the currency's performance. In this context, we expect a narrow daily trading range between 6.730 and 6.773.
The euro (EUR) opens the day with a 0.08% depreciation at a trading price of US$1.0577. The European currency began the day lower after European Central Bank Governing Council member Ignazio Visco stated that an interest rate hike in June was ruled out, but that July could be a good opportunity to begin raising interest rates. He indicated that the euro could also break out of negative interest rate territory. In this context, we expect a narrow daily trading range of 1.064–1.052.
The British pound (GBP) opened the day with a 0.01% appreciation, reaching $1.2470. Boosted by broad selling pressure surrounding the dollar, the pair extended its weekly rally and surpassed the $1.2500 level for the first time in two weeks on Thursday. Earlier in the day, data released by the UK Office for National Statistics showed that April retail sales increased 1.4% month-on-month. This was much better than the market's expectation of a 0.2% decline and helped the pound remain firm. Against this backdrop, we expect a narrow daily trading range between $1.256 and $1.239.
The Japanese yen (JPY) opened the session lower, with USD/JPY advancing 0.02%, trading around 127,82 yen. The pair attracted buying on Friday and further recovered from the monthly low hit on Thursday. The People's Bank of China cut its five-year lending rate by 15 basis points to counter the economic slowdown, boosting investor confidence. This was evident from a solid recovery in the equity markets and undermined the safe-haven Japanese yen. This, coupled with a healthy rebound in demand for the US dollar, acted as a tailwind for the major. Against this backdrop, we expect a tight daily trading range between 128.675 and 127.089.
The Japanese yen (JPY) opened the session higher, with USD/JPY advancing 0.46% to trade around 128.99 yen. The pair gained some positive traction on Friday and further recovered from a two-week low. A combination of supportive factors helped the USD/JPY pair gain some positive traction on Friday and built on the overnight rebound from the mid-127,00s, or two-week low. A healthy recovery in equity markets undermined the Japanese yen, which, along with the rebound in US Treasury yields, acted as a tailwind for spot prices. Against this backdrop, we expect a tight daily trading range between 129.604 and 128.269.
The Swiss franc (CHF) is opening the day with a 0.12% gain at 0.9724 francs per dollar. This comes after the dollar lost strength following a multi-week rally. Thus, the greenback has been supported by investors' sense of security amid a market rout due to fears of high inflation and a Russian invasion of Ukraine. In this context, we expect a narrow daily trading range between 0.977 and 0.968.
The Canadian dollar (CAD) is opening the day with an upward exchange rate at C$1.2927, a slight increase of 0.0%. The Canadian dollar is depreciating against the US dollar as the appetite for riskier assets in the global market wanes amid an increase in global risk aversion. Currently, price action is approaching oversold levels, and US dollar buyers are likely to defend their support area for the time being. In this context, and in line with its market profile, a narrow trading range between 1.31 and 1.298 is expected.
The Australian dollar (AUD) is opening the day with a 0.22% depreciation, reaching 0.7062. A rally in global equities combined with rising industrial metal prices in the wake of the Chinese central bank's latest move to lower its 5-year lending rate, which should boost the country's struggling real estate sector and, in turn, put the yuan on track for its best week this year, is benefiting the Australian dollar on Friday. Against this backdrop, we expect a tight daily trading range between 0.712 and 0.701.
The New Zealand dollar (NZD) opened the day with a 0.41% depreciation, trading at 0.6405. The pair rose for the second consecutive session and again approached a two-week high. The People's Bank of China cut its five-year lending rate by 15 basis points to counter the economic slowdown, boosting investor confidence. This was evident from a strong recovery in the stock markets, which, in turn, was considered a key factor benefiting the riskier kiwi. Against this backdrop, we expect a narrow daily trading range of 0.645–0.637.
We are convinced that every investor should diversify their investments across a variety of asset classes, regardless of market environment or trend, and work closely with their financial advisor to ensure their portfolio is adequately diversified and that their financial plan supports their long-term goals, time horizon, and risk tolerance. However, diversification does not guarantee profit or protect against loss. The preceding information, as well as the individual companies and/or securities mentioned, should not be construed as investment advice, a recommendation to buy or sell, or an indication of an intention to trade on behalf of any Acciones & Valores SA product. The securities mentioned may or may not be part of Acciones & Valores SA funds. For a complete list of Acciones & Valores SA portfolio holdings, please refer to the most recent annual, semi-annual, or quarterly report on our website. This document is for informational purposes only. Acciones y Valores is not responsible for the interpretation of such information, given that it does not cover all the aspects that an investor might consider necessary or desirable to analyze their decision to participate in a transaction, given that it is presented in an abbreviated form. For complete and absolute accuracy, investors must consult all documents provided through the website. Likewise, investors must conduct their own financial and legal analysis before making any investment decision. The values and figures contained herein are obtained from market sources presumed to be reliable, such as Bloomberg, Reuters, and the Issuers. The ratings contained in this report should not be considered investment recommendations or substitutes for ratings issued by certified credit agencies such as Moody's or Standard & Poor's. These ratings are solely quantitative; they do not include qualitative factors and depend on the financial information available in the market at the time of preparation. The opinions, estimates, and projections in this report reflect the author's current judgment as of the date of the report, and it is clarified that the content of the information contained herein is subject to change without notice. The authors' compensation is not associated with the results of the report or the recommendations made. The presentation and any preliminary documents regarding the products mentioned herein do not constitute a binding public offer; therefore, both the presentation and any other documents are subject to supplement or correct.
Héctor Wilson Tovar García Macroeconomic Analysis
Research Manager wtovar@accivalores.com
Laura Daniela Triana Pulido Equity Analyst daniela.triana@accivalores.com
Daniel Herrera Hernandez Fixed Income Analyst daniel.herrera@accivalores.com
Juan Pablo Bejarano Holding Sector Analyst juan.bejarano@accivalores.com
Andres Felipe Campos, Retail Sector Analyst andres.campos@accivalores.com
Daniel Felipe Pardo Energy Sector Analyst daniel.pardo@accivalores.com
Juan Felipe Herrera, Financial Sector Analyst juan.herrera@accivalores.com
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