Ibovespa starts week down 0.80%, below 118,000 points By Estadão Content

2023-07-11 10:00:22

© Reuters Ibovespa starts week down 0.80%, below 118 thousand points

Coming from a gain of 1.25% on Friday, the variation remained contained in this first session of the week that will bring new data on inflation in the United States, at a time when the market is trying to listen to signals from the Federal Reserve regarding the Americans – and the issued today came in the direction of further increases in borrowing costs in the world’s largest economy. Despite the moderate advance that prevailed at the close of New York, and earlier also in the main markets of Europe, caution was imposed on the B3 (BVMF:), which operated lower since the opening, at 118,897.42 points.

In the end, without domestic catalysts that pushed the Ibovespa in another direction, the index showed a loss of 0.80%, at 117,942.44 points, with a minimum at 117,814.49, in variation of just over a thousand points compared to the opening. The turnover was only R$ 18.1 billion this Monday. In the month, the Ibovespa goes into negative territory (-0.12%), but in the year it still maintains an increase of 7.48%.

“Inflation data in China – stable for the consumer and falling for the producer – corroborated the perception of a slowdown in activity in the Asian country, which remains the focus of investor attention, especially in markets with exposure to commodities, such as Brazil “, says Guilherme Paulo, equity operator at Manchester Investimentos. Thus, among the shares with the greatest weight on the Ibovespa, the highlight is the 1.53% drop in Vale ON (BVMF:) this Monday, on a day of 3.46% retraction for the in Dalian, China, and of nearly 4% in Singapore.

The performance of Petrobras (BVMF:) even contributed to mitigate the negative effect on the Ibovespa, but in the end the company’s shares did not show a single sign, with the ON stable and the PN up slightly by 0.17%, despite the decline around 1% for the oe on this monday. At the negative end of the index in this week’s opening, retail names stand out, such as Renner (BVMF:) (-6.46%), Magazine Luiza (BVMF:) (-4.09%) and Via (BVMF:)( -3.77%). On the opposite side, Azul (BVMF:) (+3.11%), Ambev (BVMF:) (+1.08%) and Raízen (BVMF:) (+0.95%).

At the close, the consumption index (-0.94%), with exposure to the domestic cycle, had a performance similar to that of the basic materials index (-0.87%), correlated to prices and demand generated outside Brazil. Among the large banks, losses for the day reached 1.84% (BB (BVMF:) ON) at the close, with the exception of Bradesco (BVMF:) (ON +0.07%, PN +0.06%).

“In the United States, American stock markets operated between losses and gains, in the week that marks the beginning of the second quarter earnings season. Financial sector companies such as BlackRock (NYSE:), JPMorgan (NYSE:) Chase, Wells Fargo (NYSE 🙂 and Citi will release balance sheets during the week”, says Vanessa Naissinger, specialist at Rico Investimentos.

Over there, the president of the Cleveland Federal Reserve, Loretta Mester, said today that she does not believe that American interest rates are restrictive enough, so they should rise further to manage to control price pressure and bring inflation back to the target of two%. Speaking at an event at the University of California, she also noted that the Fed is closer to the end of the monetary tightening cycle than the beginning, but stressed that the US central bank is committed to bringing price stability back.

On the other hand, in the United States, one-year inflation expectations fell for the third consecutive month, from 4.1% in May to 3.8% in June, according to a survey by the New York Federal Reserve released on Monday. It was the lowest reading since April 2021, and three percentage points lower than June 2022.

In turn, the president of the San Francisco Federal Reserve, Mary Daly, said that it is too early to celebrate the end of high inflation in the US, and that the projections that support two more interest rate increases by the monetary authority until the end of 2023 are “realistic and reasonable”. The monetary tightening, according to her, appears to be in the final stage.

Here, at another prominent point on the week’s agenda, investors will find out tomorrow, before the opening of business, for June.

In a report, the global research team of Bank of America (NYSE:) (BofA) highlights that Latin America is in a “privileged position” compared to the rest of emerging markets. “There is little exposure to geopolitical conflicts, and Brazil and Chile could be among the first countries to cut rates,” notes BofA, adding that inflation in both countries is already in rapid decline. “Stock markets in Chile have advanced since the fourth quarter of 2022; in Brazil, they have been recovering since April”, notes the American bank.

But BofA also points out that, for Brazil, a key issue is who will be on the buying end from now on. “We saw weak foreign inflows during most of this recovery rally, and local equity funds continue to show redemptions since inflows peaked in September 2021,” the bank adds in the report.

Still, the BofA notes that the rally since the end of April has brought the Ibovespa up 17%, compared to an average advance of just 2% for emerging markets in .

“Below-than-expected inflation contributed to the decline in interest rates and to the continuation of the stock recovery movement in Brazil”, adds the report, in which the BofA also notes that the Ibovespa, excluding commodities, is now being traded at just 5 % off historical standard, compared to a 26% off 2023 lows.