Wall Street pauses on recession fears as bonds slide again

The main American stock indices start the day with slight falls. The same is happening in Europe, with stock markets trading negative. The market remains attentive to the dynamics of the war between Russia and Ukraine and concerns remain about the inversion of the US curve, which could mean the anticipation of a recession. Argentine debt accompanies the global downward trend and falls again.

Both the Dow Jones, S&P500 and Nasdaq are trading negative on Tuesday. The Dow Jones fell 0.2%, as did the S&P500. For its part, the Nasdaq shows a bearish opening of 0.28%.

The North American market has recovered remarkably in the last month. So much so that it has already recovered 60% of all the drops seen in the first two months of the year. Still, the indices continue to trade at a loss so far this year.

In the accumulated of 2022, the Nasdaq falls 7.1%, while the Dow Jones falls 3.9% and the S&P500 loses 3.8%.

In Europe, stocks are also trading lower. The Stoxx50 fell 0.85%, similar to the drop in the FTSEMIB of Milan, which fell 0.79%. France’s CAC40, meanwhile, is the old continent’s stock market that falls the most, with a red of 1.4%.

Twitter is the novelty

Today’s cut comes after the increases evidenced yesterday and a day in which Twitter was the novelty thanks to the fact that it was learned that Elon Musk bought 9.2% of the company.

Twitter shares rose more than 27% on Monday, posting the biggest daily gain in its history. The volume traded in the stock was more than 264 million shares, also the highest in historical terms.

On the other hand, the $8.5bn rise in market capitalization was the biggest one-day jump we’ve seen since its 2013 IPO. part of the directory.

Looking at the Fed and Ukraine

The market remains attentive to two central short-term issues. On the one hand, investors continue to pay attention to the dynamics of the war between Russia and Ukraine and how the sanctions imposed on Russia could affect the global economy.

In addition, the rally evidenced in raw materials generates greater pressure on inflation both in the United States and globally. As the war continues, volatility in crude oil remains high. WTI oil starts Tuesday higher at $104.98.

Thus, the market is also keeping an eye on the rise in prices in the US and the measures that the Federal Reserve (Fed) could implement in the short term. That is, more rate hikes.

As a result of this, the market fears that the US economy will enter a recessive process as a result of the Fed’s rate hike.

In fact, the American curve inverted, which is usually a foretaste of a recession in the next 6 to 12 months and which is usually a sign that the economy is heading towards a recession in the medium term.

bonds in red

Argentine bonds follow the global downtrend and open in the red.

All Argentine sovereign tranches lost positions on Tuesday, with a drop of 0.55% in Global 2029 and 0.6% in Global 2030. For their part, in the middle tranche, Global 2035 and 2038 fell 0. 9% and 0.8% respectively. Finally, at the long end, Global 2041 and 2046 trade down 0.73% and 0.7%, respectively.

Despite the agreement with the Fund, the market continues to see risks of default in Argentine bonds. That is why the debt yields above 25% in the short section of the New York law and 30% in the short section of the local law. In turn, the debt yields between 18% and 20% in the middle and long part of the local and foreign law curves.

The fact that the bonds have not recovered even higher positions after the agreement sealed with the Fund shows that the market continues to distrust the government’s ability to pay the debt.

From Cohen they consider that, already with the first disbursement from the IMF, with the entry into the high season of agricultural liquidation and with the appreciation of the currencies of neighboring countries, the context for Argentine assets is favorable for the short term.

At the same time, they warn that the threat continues to be the acceleration of inflation and the political instability generated by the internal one in the ruling party.

“With these advances, and given that the scenario where the risk of default was priced in has passed, we can expect that by the end of the year the prices will show a considerable advance. However, the pace will be set by the political context and the IMF’s quarterly reviews “, they commented.

From Portfolio Personal Inversiones (PP) they consider that the signing of the agreement, the extension of the terms with the Paris Club and a more pleasant external climate for emerging credits pushed the better tone for bonds in dollars in recent days.

“The agreement was a point in favor of the debt, avoiding a disruptive scenario. However, meeting the goals is in doubt with the acceleration of inflation and high energy costs. Meanwhile, the shortage of fuel and the high prices of inputs in agriculture can condition the accumulation of foreign currency in full seasonality of the liquidation of the sector”, they affirmed.

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