The US and China signed their phase one trade agreement. Wall Street did not sell on the news, but went up again and reached a new record. The Buenos Aires Stock Exchange, on the other hand, went down against the golden moment of the markets. The Central Bank added reserves again.
Wall Street futures rose on Thursday before the opening of the market, signaling a bullish start in the main global reference market. European indices remain stable. The main world indices responded to the signing of Phase One of the trade agreement between China and the United States, which took place yesterday after 18 months of conflict between the two largest economies in the world.
Although the agreement was within traders' expectations, the market did not sell on the news. Stocks continued to rise despite being at record highs. Yesterday, all three major New York Stock Exchange indices closed up slightly. The Dow Jones added 0.3% to 29,030 points, while both the S&P500 (3,289 points) and the Nasdaq (9,258 points) increased 0.1% each.
The trade pact commits the Asian country to increase the purchase of U.S. agricultural and manufacturing products. Thus, China would increase its purchases of goods and services by USD 200 billion over two years. For its counterpart, the United States reduces tariffs to 7.5% on about USD 120 billion in Chinese products but maintains taxes on another USD 380 billion that will be the currency of exchange for the negotiation of the Phase Two agreement.
Argentina is not invited to the party
Contrary to the global markets, the Buenos Aires Stock Exchange is going through another difficult week. Affected by the announcement that the Province of Buenos Aires will not be able to meet its debt maturity on January 26, the local market noted a new low yesterday.
The S&P Merval index of the Buenos Aires Stock Exchange lost 0.93% on Wednesday and accumulated a 1% decline so far in January. Regarding the changes, the financial sector was the most punished, with BBVA Argentina falling 5.06%, while on the upside Cablevisión Holding stood out with a 5.45% rise.
Thus, while the Dow Jones Industrial Index in the United States reached 29,000 points for the first time in its history and dragged the world's main markets higher, the S&P Merval in Buenos Aires remained at the same dollar values as in 2015.
For the time being, the Buenos Aires Province has not been downgraded
Moody's said in a statement that the officialization that the Province of Buenos Aires cannot pay the maturity of a bond that falls on January 26 does not change the credit note of the district.
Even so, the rating agency said it will analyze the proposal made by the province to its creditors to postpone payment to decide on a cut. There is time until Jan. 22 for creditors to respond if they accept the Buenos Aires proposal. If those who accept add up to less than 75% of the bonds in circulation, the proposal will not be successful and Buenos Aires could fall into default.
"The ratings of the Province of Buenos Aires (Caa2, under review for downgrading) are not affected by the Province's announcement to seek the consent of bondholders to postpone payment of their bonds due in 2021. The scope of the downgrade review initiated on September 3, 2019, will be expanded to take into consideration the request and the outcome of the consent to restructuring these bonds," Moody's said in a statement.
The Central Bank added reserves again
The re-emergence of export supply and subdued demand in the domestic foreign exchange market helped the exchange rate drop a notch on Wednesday. With the market more relaxed, the Central Bank bought back foreign currency to add to its reserves after two consecutive rounds of selling.
The BCRA's international reserves reached USD 45.076 million on Tuesday, according to data subject to adjustment. In January 2020 they accumulated an increase of USD 298 million.
In a framework of strong monetary emission, constant inflation in the order of 4%, and also the devaluation of currencies of commercial partners, the alternative parities register in January a rise close to 8%, as reflected in the quotation of the "spot with liquidation", over $ 81 and already close to the "solidarity" dollar. The gap between the "spot with liquid" and the wholesale dollar reached 35 percent.