NYSE stock futures are falling (S&P 500 -0.8% – Nasdaq -0.9%) as concerns about the Fed's aggressive rate-hiking trajectory outweigh strong corporate earnings and China's stimulus plans. Stocks have rebounded following signs of an eventual ceiling on inflation and a Q2 22 earnings season where four out of five companies met or beat estimates.
The dollar and Treasury yields are rising ahead of the minutes of the latest Fed meeting, where the central bank's sensitivity to weaker economic data is being examined following a 225 basis point increase in the benchmark rate and the likelihood of a recession, which is weighing on confidence. There is growing concern that Fed rate setters will remain focused on fighting inflation rather than supporting growth.
Earlier on Wednesday, stocks rose in Asia amid speculation that China could deploy more stimulus to prop up its ailing economy. After a string of weak data driven by a slump in the real estate sector and COVID restrictions, Chinese Premier Li Keqiang asked local officials in six key provinces, representing 40% of the economy, to strengthen pro-growth measures.
In Colombia: Asobancaria event in Cartagena today including the participation of BanRep Manager Leonardo Villar and Andrés Velasco, director of the Autonomous Committee of the Fiscal Rule * Auctions: 9:30am: COP300,000 million of TES UVR maturing in 2029, 2037, 2049 * This week: Asobancaria event including the participation of: August 18: Co-director of BanRep Roberto Steiner; Technical Vice Minister of Finance Gonzalo Hernández; Minister of Agriculture Cecilia López * August 19: Minister of Finance José Antonio Ocampo; President Gustavo Petro.
International: 7:30am: U.S. Pre-Retail Sales July; m/m est. 0.1%, prev 1% * 9:30am: U.S. Crude Oil Inventories Aug. 12; est. 800,000 billion brls, prev 5.46 million brls * 1pm: Fed Minutes * Fed Agenda: 8:30am: Governor Bowman discusses technology and financial services * 1:20pm: Bowman discusses COVID-19 and the role of women in the U.S. economy
near the $85.00 level on Tuesday. The continued downward movement was accompanied by a decrease in open interest, which could indicate a short-term pause in the decline.
US: Treasury bonds maintain losses from the European session. The belly of the curve leads the losses, with an average devaluation of 9 bp. Thus, the inversion of the 2-10 year spread curve decreases to around -45 bp. The 20-year bond auction will be held later today.
Developed Markets: Following July inflation data from England, which exceeded market expectations, reaching 10.1% compared to 9.8%, rate hike expectations through February rose to 175 bp. Gilts fell 17 bp as a result. Bunds and French bonds posted losses of less than 15 bp across all nodes, reflecting the same signal that the central bank's rate hikes are still ongoing.
Emerging Markets: Indian bonds are rallying after a sharp drop in oil prices and a strengthening of the rupee.
Colombia: Treasury yields opened higher, ending the session in positive territory. The Treasury yield curve remains flat, and most bonds are testing the lows of the long-term upward trend. Despite the corrections of recent sessions, we expect Colombian bonds to resume their upward trend in an international market gripped by risk aversion. Thus, we expect the upward movement to begin at the curve's longest-duration nodes. For today we expect a trading range of 10.50%-10.80% for TES 24, 11.40%-11.80% for TES 27, 11.50%-11.90% for TES 31, 11.90%-12.40% for TES 42 and 11.70%-12.10% for TES 50.
The dollar (DXY) is trading at 106.8 points this morning. The index is advancing for the fourth consecutive session and extending its rebound from last week's five-week lows near 5. The dollar is experiencing additional volatility today amid the FOMC Minutes and Retail Sales, which could be a key focus for investors.
The Colombian peso (COP) closed at $4,255 pesos, a 2.23% depreciation compared to the previous close. The speed of the exchange rate devaluation is primarily explained by the holiday, as yesterday's movement combined the movements of two days. The supply of dollars came from the derivatives market, while demand came from the real estate sector.
The euro (EUR) is trading at $1.0151, down -0.1929%. EUR/USD is weakening amid geopolitical concerns, driven by growing speculation about a potential recession in the region. This appears to be supported by increasingly weak sentiment indicators and an incipient slowdown in some data, accompanied by recent UK inflation data, which rose to 10.1%. In this context, we expect a narrow daily trading range of 1.023-1.01.
Stock futures fell on Wednesday due to a rally that has driven stock prices higher since mid-June. Futures tied to the Dow Jones Industrial Average fell 186 points, or 0.55%. S&P 500 and Nasdaq futures fell 0.76% and 0.87%, respectively. As for the indices, the Dow Jones had its fifth consecutive day of gains, while the S&P 500 had its fifth positive week.
Chinese markets are performing positively, with the Shanghai Composite closing up 0.45% at 3,292.53 and the Shenzhen Component rising 1.01% to 12,595.46. In Hong Kong, the Hang Seng Index rose 0.46%. Shares of Chinese food company Meituan are up 3.34%. The move marks a 9% rally following reports that Tencent plans to sell most of its stake. Elsewhere, Tencent shares held steady. Japan's Nikkei 225 Index rose 1.23% to 28,868.91, while the Topix Index added 1.26% to 1,981.96 after the country reported year-over-year export growth. In South Korea, the Kospi fell 0.67%, led by declines in some of the largest companies: Hyundai Motor (3.8%), Kia (4.02%), and Seah Steel Holding (2.75%). The S&P/ASX200 in Australia rose 0.31% to close at 7,105.4. The biggest gainers were banking stocks, coal producer Whitehaven Coal, and media corporation Seven West Media. MSCI's broadest index of Asia-Pacific shares excluding Japan rose 0,43%.
European markets were slightly lower. The Stoxx 600 fell 0.5% after giving up earlier gains. Basic resource companies and auto stocks each fell 1.3%, while food and beverage stocks added 0.8%. London's FTSE fell 0.29% to 7,514.69, while Germany's DAX fell 1.31%.
The MSCI index closed the day in negative territory, falling 0.71% to 1,330.82 points. The most active stocks were Preferencial Bancolombia with COP $43,030.33 million, Ecopetrol with COP $33,887.75 million, and Bancolombia with COP $16,484.39 million.
- Conconcretos will report its 2Q22 results. Positive expectations are expected following the July 27 report on its participation in projects related to the Bogotá metro.
- Grupo Argos presented positive results for 2Q22, with favorable performance in each of its market segments.
- Grupo Sura reported strong results for Q2 22, mainly due to growth in written premiums and investment income.
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, Research Manager wtovar@accivalores.com
Geiber David Gamba Leguizamón Equity Analyst geiber.gamba@accivalores.com
Paola Andrea Lama Velasquez Fixed Income Analyst paola.lama@accivalores.com
Estiven Hurtado Cortés Utilities estiven.hurtado@accivalores.com
Sarah Garces Anzola Retail Sector Analyst Sarah Garces@accivalores.com
Juan Camilo Buendia Sector Holding juan.buendia@accivalores.com
Valentina Orozco Energy Sector valentina.orozco@accivalores.com
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