Weekly Market Recap – June 20th

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Crypto faces a tough month

Traditional assets are not the only ones taking a hit with the new interest rate environment. Cryptocurrencies have been faced with violent selling pressure as well.

Investors continue to shed risk from portfolios as uncertainty over inflation and the evolution of the geopolitical landscape weigh down on sentiment. Bitcoin has fallen 37% since the start of June while Ethereum has fallen over 44%.

Source: Bloomberg

Petro wins Colombian General Election

Colombia is bracing for the prospect of a radical change in economic and political direction after electing a former guerrilla to the presidency on a platform of transforming the country’s business-friendly model.

Petro took 50.4% to 47.3% for Hernandez, according to Colombia’s election authorities. He assumes office on Aug. 7 along with his running mate, Francia Marquez, a 40-year-old environmental activist who will become the country’s first Afro-Colombian vice president.

According to BBVA:

  • Market reaction will be negative in the short term

  • Markets were pricing a 50%-50% probability of a Petro win

  • The selloff will likely dissipate as “foreigners are going to apply the logic of sell the rumor buy the fact”

  • Foreign investors will buy that selloff

  • “Going forward, it will depend on what his government will be like, who will be his finance minister, what proposals, what his tone is”

  • Colombian peso will likely fall 5% on Tuesday, and local bond yields could increase 50-100 basis points with a steepening bias of the curve

Source: Bloomberg

Iron Ore Retreats

Iron ore futures in Singapore have lost about a fifth of their value in an eight- day run of declines on signs that China will struggle to put the coronavirus behind it anytime soon. The steel-making ingredient is now below where it was at the start of year, with a property-market slump also weighing on demand. Recent optimism that an easing of the current outbreak would lead to a swift economic rebound has been replaced by the reality of mass testing and the constant threat of more lockdowns unless Beijing relaxes it Covid Zero policy.

Source: Bloomberg

Is the Worst Over for U.S. Stocks?

In a volatile week for US stocks, the S&P 500 Index suffered its worst week since the height of the coronavirus-fueled selloff amid fears that an aggressive series of interest rate hikes by the Federal Reserve would plunge the economy into a recession. The benchmark fell 5.8%, its biggest one-week decline since March 2020. While the gauge initially rallied following the Fed’s largest rate increase since 1994 on Thursday, enthusiasm quickly faded as investors worried that it would not be enough to slow runaway inflation.

Source: Bloomberg

Real Estate Showing Cracks

Homebuilder stocks have been hammered this year as mortgage rates continue to surge. Now analysts are starting to lose their nerve, with at least three research firms reducing their ratings on some stocks in the sector over the past two days as the average US 30-year mortgage jumped by the most in 35 years and housing starts dropped more than expected in May. The downgrades are a signal that more pain could be in store for the hard-hit sector, which has plunged more than 40% so far this year, set for its biggest annual decline since 2007.

Source: Bloomberg