Market Round-Up

Over the last few months, we have highlighted South America as an area of economic interest, particularly in regard to the proposed common currency between Brazil and Argentina and the changing political landscape seen across much of the continent. Unfortunately for countries such as Argentina, which have continued to struggle with inflationary pressures and central bank reserve liquidity, things aren’t yet at a turning point. Inflation data for February has shown that Consumer Price Index (CPI) figures, an indicator of inflation within an economy, have hit the highest level in three decades at 102.5%.

Despite the state’s continued price control programme which has frozen the cost of more than 1,700 goods until December 2023, the Argentinian government has succeeded in taming the aggressive price pressures. Inflation has risen due to large droughts and prolonged heatwaves which have significantly impacted crops and livestock, causing shortages and uncertainty amongst farmers and consumers, thus pushing up the cost of food and drink by 9.8% in February compared to the previous month.

A proportion of the country’s inflationary problem has also been caused by excessive borrowing and money supplies within the economy, causing the local currency, the Argentinian Peso, to devalue. As a result, locals have resorted to buying US Dollars to protect themselves from declining purchasing power which is traded within a 'blue dollar' currency exchange.

According to figures published by the Insolvency Service in March, the number of registered company insolvencies in England and Wales reached 1,783 in February. This figure was 17% higher than in the same month in 2022 and 33% higher than in February 2020, before the onset of the COVID-19 pandemic. It is highly likely that the transition away from pandemic support packages, combined with a weakening economic outlook, increased the cost of debt and rising levels of winding-up petitions have all led to an increased number of compulsory liquidations.

However, many of the businesses that went bankrupt during that period were on a smaller scale so it is unlikely that they pose a significant risk to financial markets or consumers. Despite this, the recent failure of Silicon Valley Bank, which had a UK arm, caused global worries for financial markets as fears around the stability of the US banking sector caused other firms’ shares to plummet.