Brazilian Real Continues to Depreciate, Reaching 6.2 per Dollar

Posted on December 27, 2024 by Ignacio Teson

The dollar opened the session higher following inflation and employment data. The currency had risen by 0.33%, reaching R$ 6.1977.

The currency reacted to the release of the IPCA-15, the official inflation preview, which increased by 0.34% month-over-month, lower than the 0.44% projections made by analysts surveyed media outlets. Despite this, the indicator closed the year at 4.71%, above the upper limit of the target.

[[USD/BRL-graph]]

The labor market also saw a new low for the unemployment rate in November, which stood at 6.1%.

A strong job market, high dollar, and rising inflation contribute to the outlook for interest rate hikes in 2025, which continues to concern market analysts.

The fiscal deficit in Brazil is leading to depreciation of the real by creating economic instability and reducing investor confidence. When the government spends more than it earns, it is increasing borrowing, which raises concerns about the country’s ability to repay its debt. This uncertainty is driving investors away, putting downward pressure on the currency.

Interest Rates and Projections

Interest rates were falling across the curve. The market reacted to the release of the IPCA-15 data. The official inflation preview showed a 0.34% increase in December, a slowdown from the 0.62% rise seen the previous month.

The interbank deposit rate (DI) for January 2026 rose to 15.26% (compared to the 15.41% closing on Thursday); For January 2027, the rate was higher at 15.575% (compared to 15.70% at the close); For January 2028, the rate increased to 15.44% (compared to 15.59% at the close); For January 2029, the rate rose to 15.275% (compared to 15.395% at the close); And for January 2030, the rate climbed to 15.13% (compared to 15.27% at the close).

Warren Buffett Doubles Down on VeriSign

Posted on December 27, 2024 by Ignacio Teson

Berkshire Hathaway has significantly increased its stake in VeriSign, doubling down on the company’s growth potential in the domain registration sector.

Warren Buffett’s investment firm disclosed its latest moves in a Form 4 filing with the U.S. Securities and Exchange Commission (SEC) on Thursday evening. The filing revealed that Berkshire Hathaway spent $28.55 million to acquire 143,424 shares of VeriSign Inc. over three trading sessions ending December 24.

In total, over six trading sessions through December 24, Berkshire purchased 377,736 VeriSign shares for $73.95 million, at an average weighted price of $195.78 per share.

These acquisitions bring Berkshire’s total holding in VeriSign to 13,193,349 shares, representing 13.7% of the company’s outstanding shares. At Thursday’s closing price, this stake is valued at approximately $2.67 billion.

Berkshire’s 13F filings reveal that it first began investing in VeriSign during Q1 2024, holding 12,815,613 shares as of March 31. The position remained unchanged until these recent purchases.

VeriSign shares rose 0.5% in premarket trading on Friday, reaching an 11-month high. The stock is now on track for its sixth consecutive gain, marking its longest winning streak since August.

VeriSign gained prominence during the late 1990s internet boom as a leading provider of domain name registrations. The company manages domains ending in .com, .net, .cc, and .name.

VeriSign went public on January 30, 1998, closing its first trading day at $6.38 (adjusted for splits). The stock surged 131.7% by the end of that year and skyrocketed 1,191.8% in 1999. It reached an all-time high of $253 on February 29, 2000, before the dot-com bubble burst. The stock surpassed that peak in 2021, achieving a record close of $255.93 on December 29, 2021.

As of Friday, VeriSign shares were trading 20.8% below their record high and are down 1.6% year-to-date.

Argentina’s Country Risk Drops to Lowest Levels Since 2018

Posted on December 27, 2024 by Ignacio Teson

On Thursday, Argentina’s sovereign risk rate fell by 19 basis points from the previous close, settling at 631 points. During the session, it briefly touched a low of 628 points. This decline coincided with a rise of up to 1.1% in the value of Argentina’s global bonds.

Financial markets in Argentina rallied after the holiday period, leading to further compression in country risk, now approaching the psychological barrier of 600 basis points (bps). This dynamic was welcomed by market participants and the economic team of President Javier Milei.

Argentina’s Assets on the Rise

The sovereign risk rate’s decline to 631 points marks its lowest level since November 2018. Sovereign debt prices in foreign currency continued to rise, contrasting with the average performance of emerging market debt. Argentina’s global bonds saw daily gains of up to 1.1%, particularly those maturing in 2041, 2046, and 2035.

Equities also performed strongly. Argentine ADRs in the U.S. gained as much as 6.2%, led by Telecom, Cresud, and Loma Negra. On the downside, Edenor, Supervielle, and Mercado Libre recorded losses of 0.6% to 2.7%.

In the local market, the S&P Merval index rose by 1.8% in pesos to 2,597,388.5 points. In dollar terms, the index gained 0.5%, closing at $2,185 using the cash-with-settlement (CCL) exchange rate, nearing its all-time inflation-adjusted high.

Projections and Outlook for Argentina

The stock market rally was driven by strong liquidity and increased demand for shares in industrial and telecommunications companies, with daily gains of up to 7.5%.

The reduction in country risk comes amid expectations of a new agreement between the Argentine government and the International Monetary Fund (IMF), which would result in a new disbursement to strengthen Argentina’s international reserves.

This agreement is supported by positive inflation data, as November’s inflation rate dropped to 2.7%, falling below the 3% monthly threshold for the first time since September 2020.

Additionally, the economic growth of 3.9% quarter-over-quarter in Q3 2024 signals a recovery, moving past the recessionary phase of the country’s GDP.

Crude Oil Closes 2024 with Falling Prices

Posted on December 27, 2024 by Ignacio Teson

Crude oil prices in the international market are on track to record losses in 2024. This marks the second consecutive year of declining prices, primarily driven by geopolitical conflicts and a stronger dollar.

Brent crude, the benchmark for markets in regions such as the Middle East, Europe, and Africa, has seen a 4.91% decline from $77.04 per barrel on December 29, 2023, to $73.26 per barrel as of December 27, 2024, marking its second year of losses.

West Texas Intermediate [[USOIL]], primarily a reference point for the U.S. oil market, experienced a 2.41% decrease from $71.65 per barrel to $69.92 per barrel, also marking its second consecutive annual decline.

[[USOIL-graph]]

Oil Outlook and Drivers

On the demand side, China continued to drive global oil consumption, while on the supply side, moderate global economic growth helped stabilize the market. Key contributors to this balance included production levels from the Organization of the Petroleum Exporting Countries (OPEC), Russia’s role in supply, and increased U.S. production. These factors helped maintain relative stability despite ongoing geopolitical conflicts, particularly in the Middle East.

One of the main drivers of oil price behavior this year was global economic uncertainty. Concerns over potential interest rate adjustments in advanced economies such as the United States, the European Union, and Japan played a significant role.

Additionally, geopolitical conflicts in the Middle East were key factors influencing price fluctuations. Throughout the year, the region faced significant tensions, including heightened hostilities between Iran and Israel, as well as internal conflicts in Iraq and Yemen. These events raised concerns about oil supply stability, given that the Middle East accounts for 30% of global production.

Mexican Peso Weakens Amid Volatile Trading Session

Posted on December 26, 2024 by Ignacio Teson

The Mexican peso depreciated against the dollar on Thursday, retreating in a session marked by volatility. The decline followed data showing that the number of Americans filing for unemployment benefits dropped last week to its lowest level in a month.

The exchange rate closed the session at 20.2083 pesos per dollar, based on the official data from the Bank of Mexico (Banxico). Compared to a reference price of 20.1490 pesos yesterday (as reported by LSEG, with no official figure due to the holiday), the peso lost 5.93 cents, or 0.29%.

During the session, the dollar traded within a range of 20.1318 pesos at its lowest and 20.2330 pesos at its highest. Meanwhile, the U.S. Dollar Index (DXY), which measures the greenback against a basket of six major currencies, slipped 0.07% to 108.12 points.

[[USD/MXN-graph]]

Initial unemployment claims in the U.S. fell by 1,000 last week, reaching 219,000, according to a weekly report from the U.S. Department of Labor. Economists surveyed by Reuters had anticipated claims to come in at 224,000.

Investors remain focused on potential indicators for the interest rate trajectory in Mexico and the United States for the coming year. This follows December rate cuts announced by both the U.S. Federal Reserve (Fed) and Banxico.

Mexico Stock Exchanges

Meanwhile, Mexico’s stock markets recorded moderate gains this Thursday. Local indices rose after two consecutive sessions of declines and following the Christmas holiday, with trading volumes lower as the year-end approaches.

The benchmark S&P/BMV IPC index, which tracks the most traded stocks on the Mexican Stock Exchange (BMV), climbed 0.44%, closing at 49,535.58 points. Meanwhile, the FTSE BIVA index, representing the Institutional Stock Exchange (Biva), gained 0.41% to reach 1,005.58 points.

Oil Drops on Dollar Strength in Quiet Holiday Trading

Posted on December 26, 2024December 26, 2024 by Ignacio Teson

Oil prices fell on Thursday in a subdued session influenced by the holiday season, as a strong U.S. dollar overshadowed hopes for increased fiscal stimulus from China, the world’s largest oil importer.

Chinese authorities agreed to issue 3 trillion yuan ($411 billion) in special Treasury bonds next year, agencies reported on Tuesday, citing two sources. The move aims to bolster fiscal stimulus and revive a faltering economy.

Brent crude futures dropped 19 cents, or 0.26%, to $73.39 per barrel, while West Texas Intermediate (WTI) crude fell 21 cents, or 0.3%, to $69.89 per barrel.

[[USOIL-graph]]

The World Bank raised its economic growth forecasts for China in 2024 and 2025 on Thursday but cautioned that weak household and business confidence, alongside headwinds in the real estate sector, will continue to weigh on growth in the coming year.

Latest Macroeconomic Data

Meanwhile, the U.S. dollar extended its rally, reaching record highs. A stronger dollar makes [[USOIL]] more expensive for holders of other currencies.

The latest weekly U.S. inventory report from the American Petroleum Institute (API) showed crude stocks fell by 3.2 million barrels last week, according to market sources on Tuesday.

Traders will be watching for confirmation from the official inventory report by the Energy Information Administration (EIA), which is set to be released Friday, delayed due to the Christmas holiday.

U.S. Unemployment Claims Hit Three-Year High

Posted on December 26, 2024 by Ignacio Teson

The slight decrease in initial unemployment claims suggests that, while the U.S. labor market shows signs of cooling, it remains strong and healthy.

The number of Americans filing new unemployment claims dropped to its lowest level in a month last week, yet still reached its highest point in more than three years, indicating that unemployed individuals are increasingly struggling to find new jobs.

Initial state unemployment claims fell by 1,000, seasonally adjusted to 219,000 for the week ending December 21, according to the Department of Labor’s report on Thursday. Economists had predicted 224,000 claims for the week.

[[SPX-graph]]

The number of people receiving benefits after the first week of assistance, a gauge of hiring, rose by 46,000, seasonally adjusted to 1.91 million, the highest level since November 2021, during the week ending December 14. Economists had expected the level of continuing claims to be 1.88 million.

What the data means

The rise in continuing claims suggests that those receiving benefits are having more difficulty finding new jobs. This could indicate a decline in worker demand, although the economy remains strong.

The four-week moving average of weekly claims, which smooths out some of the weekly volatility, increased by 1,000, reaching 226,500. Weekly unemployment claims are seen as indicative of layoffs in the U.S.

Thus, while the labor market shows signs of recent cooling, it remains generally healthy.”

BTC/USD Drops 2.3% and Moves Further from Highs

Posted on December 26, 2024December 26, 2024 by Ignacio Teson

Cryptocurrencies are experiencing a generalized decline on Thursday, December 26, with losses of up to 7%, led by Hedera, followed by Stellar (-6.5%) and Chainlink (-5.8%).

Bitcoin is down almost 2.3%, trading around $95,500, while Ethereum holds steady at $3,300. These drops come despite positive news surrounding MicroStrategy, which plans to issue more shares to fund additional cryptocurrency purchases.

In December, MicroStrategy completed three rounds of acquisitions, purchasing 42,162 bitcoins worth over $4 billion at current prices. Additionally, the company has filed with the U.S. SEC to significantly increase its stock issuance capacity. As part of its 21/21 Plan, presented in October, MicroStrategy intends to invest up to $42 billion in bitcoin over the next three years.

[[BTC/USD-graph]]

Bitcoin Price and Outlook

Bitcoin’s price currently hovers around $95,500, after falling below $100,000 last week following news that the U.S. Federal Reserve plans to slow down interest rate cuts. Bitcoin has since rebounded by about 6.5% from its December 23 low of $92,458 but remains far from its all-time high of $108,275 reached on December 17. Analysts suggest that its upward potential is still limited.

On an annual basis, [[BTC/USD]] continues to show significant growth, projecting a 134% increase in 2024.

Traditional Markets

In formal markets, stock indices are falling on Wall Street this Thursday, marking the first trading session after Christmas, as they trim some of the gains made during the “Santa Claus rally” earlier in the week.

The Dow Jones Industrial Average is down about 130 points, or 0.3%. The S&P 500 and Nasdaq also retreated, with losses of 0.3% and 0.2%, respectively.

China Approves World’s Largest Hydroelectric Dam

Posted on December 26, 2024 by Ignacio Teson

The Chinese government has greenlit the construction of a hydroelectric dam on the Yarlung Zangbo River in the western Tibet region.

The project is set to generate 300 billion kilowatt-hours annually, three times the capacity of the famous Three Gorges Dam, also in China. This long-discussed megaproject has sparked numerous protests and demonstrations from Tibetans.

The New Dam Project

Valued at over 1 trillion yuan (131.73 billion euros), the dam will become the most expensive infrastructure project in the world, according to state news agency Xinhua. It will be located on the lower course of the Yarlung Zangbo River, which cuts through the Tibetan plateau, creating the world’s deepest canyon.

The river also features a 50-kilometer stretch where a 2,000-meter drop will be utilized for hydroelectric generation. Tibet, with its vast hydroelectric potential, holds one-third of China’s hydroelectric resources.

In addition to meeting the annual electricity demand of 300 million people, the project aims to boost the development of clean energy sources, such as solar and wind power, in the region, according to reports from last year.

However, the first announcements from Beijing regarding the dam date back to 2020. According to the official statement, the project is intended to make a significant step in China’s transition to ecological, low-carbon energy.

The Three Gorges Dam

The Three Gorges Dam, the world’s largest hydroelectric project, is a monumental engineering feat that not only altered the course of the Yangtze River but also transformed China’s landscape and revolutionized its capacity for renewable energy generation.

With an installed capacity of 22,500 megawatts (MW) at full power and 88.2 billion kWh annually, it is currently the largest hydroelectric facility in the world. However, it will soon face competition.

Trump Names Ambassador to Panama Amid Canal Dispute

Posted on December 26, 2024 by Ignacio Teson

President-elect Donald Trump has announced the nomination of Kevin Marino Cabrera, a Miami-Dade County Commissioner, as the U.S. ambassador to Panama.

Alongside the announcement, Trump accused Panama of “scamming” the United States over the Panama Canal.

“I am pleased to announce Kevin Marino Cabrera as the next U.S. ambassador to the Republic of Panama, a country that is scamming us on the Panama Canal far beyond their wildest dreams,” Trump said in a statement. He praised Cabrera as a “fierce advocate” of his “America First” principles.

In a social media post, Marino Cabrera expressed being “very honored and grateful” for the nomination, adding, “Let’s get to work!”

Set to take office on January 20, Trump sparked controversy last Sunday by threatening to reclaim U.S. control over the Panama Canal unless Panamanian authorities lower transit fees.

Panama’s President, José Raúl Mulino, condemned Trump’s remarks in an official statement, asserting that the sovereignty of the canal is non-negotiable. His stance received support from various Latin American leaders.

The Panama Canal, built by the United States and inaugurated in 1914, was administered by the U.S. until its transfer to Panama on December 31, 1999, under the terms of the Torrijos-Carter Treaties signed in 1977 by Panama’s Omar Torrijos and U.S. President Jimmy Carter.