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The Santiago Stock Exchange ended the session with a fall of 0.53% compared to the new cases of contagion by Covid-19 and the comments that the Fed president issued yesterday regarding inflation and interest rates.
After a volatile session on Wall Street, marked by statements made yesterday by Federal Reserve (Fed) President Jerome Powell regarding inflation, the data on employment growth in the United States caused the stock market to close abruptly on Friday at the rise.
According to the information released by the authorities, more than 379 thousand jobs were created in February, above the 210 thousand that the market estimated. Likewise, the Department of Labor reported that the unemployment rate fell to 6.2%, stoking investors’ expectations of a speedy recovery of the economy to its pre-pandemic levels.
Thus, the Dow Jones Industrial Average closed up 1.85%, which placed the index at 31,496 points. Meanwhile, the S&P 500 rose 1.93% to 3,841 points, and the Nasdaq 1.55%, to 12,920 points.
“The market is consolidating around what will likely be fairly healthy and robust economic growth and inflation-related economic readings for the 2021 balance sheet,” said Jeff MacDonald, Head of Fixed Income Strategies at Fiduciary Trust International. , to Reuters.
While, 10-year US Treasury yields remain in the sights of investors at 1.566% and approaching last week’s record of 1.626%.
In addition, after the Organization of the Petroleum Exporting Countries and its allies (OPEC +) agreed yesterday to maintain their supply cuts in April, oil took another leap. Brent crude rises at this time 4.30% to US $ 69.61 a barrel, while WTI advances 3.85% to US $ 66.29.
“The market suggests a tightness that does not exist. Therefore, we continue to believe that the price risk is mainly to the downside and that the current price is being exceeded, ”Hans van Cleef, senior energy economist at ABN Amro, told CNBC.
Local overview
The Santiago stock market closed on Friday with a fall of 0.53%, which placed the IPSA at 4,675 points, after US bonds rose again due to comments from the Fed chairman on inflation and interest rates in the United States.
Similarly, investors are concerned about the coronavirus figures in Chile, which, according to the Ministry of Health, exceeded 5,000 new infections, with the Metropolitan Region being the most affected and the trigger to potentially cause the establishment of new quarantines.
Thus, the stocks with the greatest fall were Concha y Toro (3.01%), Arauco Park (2.59%) and Entel (2.29%), while those that registered the highest increases were Copec (2.62%), Vapors (2.32%) and Falabella (2.22%).
Meanwhile, despite its setback yesterday, copper closed the week with a rise of 2.67% on the London Metal Exchange, which placed the red metal at US $ 4.09 a pound. Likewise, the dollar had its best day in a month, advancing $ 11.2, placing the exchange rate at $ 737.36.
According to a BCI report projected, “the Chilean peso will continue to appreciate if favorable conditions for the price of copper persist in the coming quarters,” in such a way that, By the end of 2021, the coin could end up between $ 650 and $ 750.
Likewise, the bank assured that, if copper’s upward streak continues, the main national export product could close this year at around US $ 3.7 per pound.
“If current prices do not show abrupt changes, the price of copper will have doubled compared to March 2020. This rate of increase is only comparable to some episodes in 2006 and 2009, in the midst of the super-cycle of raw materials during the past decades “he explained.
Europe and Asia in red
Despite the fact that the Fed chairman assured that the rise in bond yields is something “remarkable” and that the “current monetary policy stance is appropriate”, investors did not think the same, especially in the face of inflationary pressures and the increase in Covid-19 cases.
As analysts at TS Lombard detailed in a note, the improvement in growth expectations in the United States accounts for much of the pressure on yields. However, the situation in the euro area is very different.
“The US Congress is on the verge of passing a large fiscal stimulus package, while European area governments struggle to commit to higher spending. Slack in European area economies is expected to persist at least until the mid-1990s. 2022, in contrast to the US, “they explained.
Thus, in the last session of the week, all European indices ended lower. The Euro Stoxx 50 fell 0.95%, the DAX in Frankfurt 0.96%, the CAC 40 in Paris 0.82%, the IBEX 35 in Madrid lost 0.80% and the FTSE 100 in London 0.31%.
Like the rest of the international markets, Powell’s comments fell like a bucket of cold water for investors who were waiting for more signals and clarity on US monetary policy.
The Nikkei 225 lost 0.23%, while the Topix Index rose 0.61%. Meanwhile, the Hang Seng and the CSI 300 fell 0.47% and 0.34%, respectively.
As Yoshihiro Takeshige, CEO of Asahi Life Asset Management’s investment management department, told Reuters, the rise in US bonds is now the focus of equity investors. For the same reason, he assured that “If the movement in yields gets out of control, the Japanese market could be dragged lower, led by the decline in US tech stocks.”
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