World stocks are reeling ahead of this week’s Fed announcements and in the face of the deepening geopolitical crisis in Ukraine.
Wall Street deepened on Monday the losses it had during the past week and the week began in the red, as did the Santiago Stock Exchange, which was coupled with the negative external environment. The Dow Jones falls 1.92%, the S&P 500 falls 1.43% and the Nasdaq falls 1.98%.
From Wells Fargo Advisors they explained that “this month’s fall in stocks deepens amid concerns about valuations and anxiety about tightening monetary policy.”
The bank noted that the S&P 500 has now entered correction territory, defined as a 10% drop from its latest high, while the Nasdaq is more than 16% off its Nov. 19 high and the Dow Jones is losing ground for the seventh day in a row, his longest losing streak since February 2020.
The CBOE Volatility Index (VIX) is reaching a level not seen since November 2020.
Wells Fargo Advisors also noted that “in addition to the dovish mood, investors are monitoring rising geopolitical tensions abroad, with the possibility that a Russian invasion of Ukraine will increase demand for safe-haven assets.”
This has pushed the yield on the 10-year US Treasury bond down four basis points to 1.72% ahead of the Federal Reserve’s monetary policy meeting.
All this takes place in the midst of the expectations of market agents about the monetary policy announcements to be made on Wednesday by the Fed, at the end of its two-day meeting.
The Fed is expected to raise the interest rate several times to try to control inflation in the US, which has grown at its fastest level in the last 40 years. In fact Goldman Sachs predicted that there could be at least four hikes.
Against this backdrop, Investors have started to prepare for the tightening of monetary policies and have begun to divest from riskier assets.
While diplomacy is deployed to avoid any armed conflict, agents will also know the corporate results of approximately 20% of the companies that make up the S&P 500.
According to data from FactSet, approximately a fifth of the companies that make up the S&P 500 have presented corporate results for the fourth quarter, of which 82% have beaten analysts’ expectations for earnings per share.
In the front of the US macroeconomic figures, the Chicago Fed National Activity Index showed that economic activity in the region contracted for the first time since February. Separately, the readings Preliminary data from research firm IHS Markit revealed that growth in the US manufacturing and services sectors slowed more than expected in January.
Chilean scenario
At a local level, SP IPSA was linked to international markets. The selective fell 3.05% and reached 4,503.21 points.
Among the most traded shares of the day was SQM-B, which fell 4.82% after it became known that Tianqui sold ADRs from the non-metallic mining company for nearly US$2.5 million. The transaction was carried out by Morgan Stanley on the New York Stock Exchange.
Another of the papers punished was Enel Américas, which fell 4.31%. The two main banks of the country also suffered in the wheel and Santander lost 2% while Banco de Chile stumbled 3.13%. The same thing happened with the big retailers From the market: Falabella contracted 3.05% and Cencosud did 3.12%.
The SP IPSA had ended Friday rising 3.52% to reach 4,644.86 points after the country learned the names that will make up the ministerial team of Gabriel Boric’s government as of March 11. With Mario Marcel at the head of the Ministry of Finance, local investors reacted positively.
Credicorp Capital said in a report published on Friday that a rebound in SP IPSA should be seen in the short term. However, he specified that “Political uncertainty remains high considering the ongoing constitutional process.”
The investment bank pointed out that the valuations of Chilean assets are “cheap” for which it observed that “It could be an attractive entry point for investors willing to hold positions for 12-18 months.”
With the cabinet announcement, the firm considered that “it is reasonable to expect a quiet month of February considering the local summer holidays.”
Looking ahead to March, Credicorp Capital pointed out that local market agents will focus on “trading will surely be reactivated during March, and all eyes will be on the first measures taken by the new government, the decisions made by the Constitutional Convention , and the fourth quarter 2021 earnings season, as most companies will release their results in late February and through March.”
Outlook in Europe and Asia
Europe fell victim to pressure. The main markets of the Old Continent began the week with losses due to fears that a conflict in Ukraine could end up destabilizing the region and the markets.
The US required the diplomatic staff stationed in Kiev to leave their relatives due to fears of an invasion by Russia.
The Euro Stoxx 50 fell 4.14% and the London FTSE 100 fell 2.63%. The Frankfurt DAX fell 3.80% and is close to 15,000 points, while the Paris CAC lost 3.97% and fell from its floor of 7,000 points. Finally, the IBEX 35 of Madrid stumbled 3.18% and erased the floor of 8,500 points.
The bund Germany is entrenched in negative rates (-0.10%) after its brief passage through positive interest rates last week. The euro struggled to hold onto the $1.13 level, and the British pound lowered its cushion above the $1.35 threshold.
Asian stocks had a day with mixed numbers. On the earnings side, the Tokyo’s Nikkei jumped 0.24% and mainland China’s CSI 300 climbed 0.16%. While the Hang Seng of Hong Kong fell 1.24%.
The prospect of higher interest rates in the US prompted investors to reassess valuations of fast-growing tech companies betting on China.