U.S. Stocks Finish Higher & Colombia is Getting Hot

Author

Faro Capital
June 09, 2023

Good Morning,

U.S stocks ended the trading day yesterday higher as treasury yields dropped which supported stocks. The number of jobless claims rose more than expected. The FOMC meeting is next week so eyes on the street will be focused on that. As of now there is a 28% chance that the FED will hike the fed funds rates by 25 basis points.

Canadian stocks finished a tad lower due to a surprise rate hike by the Bank of Canada this week. The central bank rose its key rate to a 22-yr high of 4.75% and signaled they are willing to go higher if needed.

Peru keeps its key rate unchanged at 7.75%. In the central bank’s announcement it signaled just they are open to future hikes if needed. The country’s inflation rate dropped a bit to 7.89% from 7.97%.

Markets: Before the Open

Top News Stories

Canada

  • The Bank of Canada raises rates by 25 basis points, key rate now 4.75% (BNN)

  • Montreal based airline Transat raises outlook due to strong demand (BNN)

  • T&T Supermarkets to expand in the U.S., opening a store in Bellevue, Washington (BNN)

  • Roots Corp. reported a Q1 loss of $8M (BNN)

  • The Public Sector Pension Investment Board reported it earned 4.4% in latest year (BNN)

  • Dollarama reported a 21% y/y raise in sales, looking hit 2K stores in Canada by 2031 (BNN)

  • Brookfield Asset Management aims to raise $15B in new real estate fund (BNN)

  • Stellantis reviews new offer from federal government on EV pant (BNN)

  • Merchandise trade surplus rose $1.9B in April 2023 (BNN)

  • Montreal homes sales drop 8% in May y/y (MG)

U.S.

  • Jobless claims rose higher than expected (CNBC)

  • Household assets in money markets rose $300B to record $3.3T (CNBC)

  • GM to invest $500M to next-gen escalade and other SUVs (CNBC)

  • GameStop fired its CEO Matthew Furlong (CNBC)

  • Used car prices are dropping (CNBC)

  • Boeing get sued by Wilson Aerospace for alleged IP theft & tools counterfeiting (CNBC)

  • PGA to merge with LIV Golf (CNBC)

  • Nvidia invests in A.I. startup Cohere, other investors include Oracle & Salesforce (CNBC)

  • SEC requests emergency order to freeze Binance U.S. assets worldwide (CNBC)

  • Apple unveils its new product Vision Pro headset (CNBC)

Argentina

  • Bloomberg looks at dollarization of Argentina (BBG)

  • Uala to offer high yield savings accounts in Mexico (USN)

  • Argentina Airline Flybondi plans to ground two planes due to inability to access U.S. dollars to pay for out of country services (USN)

  • Córdoba Province to meet debt payment after courts block governments capital controls (BAT)

  • Banco Itaú in talks to sell its Argentina business to Banco Macro (BAT)

Brazil

  • Federal subsides reach highest levels in six years (USN)

  • Nubank reports 1 million users in Mexico (USN)

  • Lawmakers propose consumption tax reform (USN)

  • Exports to China rose chicken & pork shipments in May 2023 (RIO)

  • Eduardo Saverin is looking to raise $500M to invest in startups (RIO)

  • JBS reported plans to produce the worlds largest lag-grown meat facility in Spain (RIO)

Chile

  • Fitch reports companies expect moderate growth plans (BBG)

  • Chile inflation slows with rate cuts soon expected (BBG)

Colombia

  • Political scandal rocks toe resident and halts plans of reforms (USN)

  • Inflation hit 12.36% down by 0.46% from last month (PORT)

  • A study showed that more than 45% of miners will reduce their operations within 5 years (PORT)

  • Construction has started for the development Vive Río in Barranquilla (PORT)

  • Mapfre names Rafael Prado new CEO (PORT)

  • List of foods that dropped in price in May 2023 (ELT)

  • Wingo will increase flight capacity by 24% later this year (ELT)

Dominican Republic

  • The government issued bonds with a rate of 9.99% (ELD)

  • Mango exports rose 30% with principal markets being U.S., Canada, and Europe (ELD)

  • The government took in $1.25B in taxes in May 2023 (ELD)

Panama

  • The government led a business mission to Japan to increase exports to the country (LAE)

  • The World Bank is projecting the economy will grow 5.7% this year (LAE)

Mexico

  • Mexico’s annual inflation hit 5.84%, the lowest since August 2021 (USN)

  • Telemex reaches pay deal with union (USN)

Insights

Whats going on with the Colombian Peso this week?

The FX currency pair USD/COP dropped -1.21% yesterday and is down -8.37% this month, breaking its 50, 100, and 200 day moving averages.

After a scandal plagued the country's president Gustavo Petro the country's currency is strengthening. The scandal is based on recordings which were released by Semana Magazine, former ambassador Armando Benedetti speaks to Petro’s chief of staff & threatens to disclose details of Petro’s 2022 presidential campaign. The potentially damaging info/activity is about campaign funds from drug trafficking groups among other things. The Petro administration’s credibility among voters is stained and his standing in Colombia’s congress is hurt. On Monday, president of congress David Racero, a member of Petro’s Historical Pact Party, suspended hearings on reforms to Colombia’s health care system, pension system and employment laws arguing that he did not want “external factors” to affect votes on those reforms.

Why is this affecting the exchange rate?

The reforms that Petro is trying to implement lean more to the left and are not market friendly. His reputation has been stained and blood is in the water politically speaking. Some politicians already signaled they're not going to work with him and stopped pushing for reforms. It looks like whatever laws he tries to change now will take longer if they even end up happening. The stoppage of reforms and the difficulty of governing by a president unfriendly to the markets presents a time where businesses of all kinds can catch a breath knowing they won't be negatively affected by reforms. The market is seeming to love this with the peso rallying. With elections for governors & mayors coming up in October the public will show how they feel towards this administration which can give an opportunity to the market friendly opposition parties. Only time will tell what becomes of all this but for now the markets seem to like it.

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