Ibovespa closes at the highest level since October, at 113 thousand points; dollar retreats

The Ibovespa had its second consecutive rise this Tuesday (1st) and closed with gains of 0.97%, at 113,228.31 points. The main stock market index closed again at around 113 thousand points after more than three months – in the face of the influence of strong increases in Vale and Petrobras shares – reaching the highest level since October 18, 2021 (114,428 points).

The local market awaits the decision of the Monetary Policy Committee (Copom), on Wednesday, which will set the basic interest rate, the Selic rate, and the start of the swing season.

already the dollar amended the fourth fall and closed at R$ 5.273, the lowest value in four and a half months, with domestic markets taking advantage of the new day of global decline in the US currency to continue disarming positions, on the eve of the interest rate decision by the Central Bank.

The spot currency fell 0.62% at the close, deepening the low in the four-day series to 3.04%. The quotation value is the lowest since September 16 of last year (R$ 5,265).

On Monday (31), the dollar closed down by 1.59%, at R$5.305, ending January with a devaluation of 4.80%. The Ibovespa rose 0.21%, to 112,144 points, accumulating an increase of almost 7% in the month.

The real has benefited from a scenario of investment migration to emerging markets and commodities linked to the expectation of high interest rates by the Federal Reserve, along with the hikes in the Selic carried out by the Central Bank, which should continue in 2022.

The market’s expectation is that the Copom will raise the basic interest rate, Selic rate, by 1.5 percentage points on Wednesday, from 9.25% to 10.75% per year. The movement favors the real, making Treasury bonds more attractive, but it is negative for stocks, as it also makes fixed income more attractive than variable income.

In this scenario, the balance of foreign investments in January was positive by more than R$ 28 billion.

commodities

Investors have also carried out a process of migration to areas linked to commodities and for emerging markets, which favors Brazil and the real, as the Brazilian stock exchange has a large number of companies linked to the sector.

On the stock exchange, stocks such as Vale (VALE3) and Petrobras (PETR3 and PETR4) benefit from increases in iron ore and oil, and are important members of the Ibovespa.

Expectations of more pro-growth measures in the Chinawhile bearish economic pressures persist, hopes are rising for a pick-up in demand for metals, analysts said, leading to higher prices.

In the case of oil, analysts at Goldman Sachs say that Brent oil prices are expected to exceed US$ 100 a barrel this year. According to them, the oil market remains in a “surprisingly large deficit” as the effect of the Omicron variant of coronavirus in demand for the commodity is, so far, lower than expected. In addition, tensions in Ukraine affect prices.

Brazil

In the local scene, The increased fiscal risk remains on investors’ radar. A bill on fuel taxes, called the Fuels PECraised fears of fiscal mismanagement.

A market analyst defines that the perception is that the government is going for all or nothing, and should move towards more populist measures to increase its popularity until the elections.

According to the projection of the XP analysis team, the PEC can reduce the collection between R$ 70 billion and R$ 100 billion. However, the government is already discussing including only diesel in the text, without gasoline.

Yesterday, President Jair Bolsonaro (PL) stated that it is Congress that must present the PEC for fuels. The president of the Chamber, deputy Arthur Lira (PP-AL), said that the PEC will focus on diesel. At an event this Tuesday, Minister Paulo Guedes also expressed himself in favor of the idea.

If in fact the exemption is restricted to diesel, the loss of collection should fall from R$ 70 billion to R$ 20 billion. Analysts assess that the market can react well to a more modest subsidy – but they do not rule out the pressure for more exemptions.

Up and down from B3

Here are the highlights of Tuesday’s trading session:

biggest highs

• Inter Bank (BIDI11) +8.08%
• Voucher (VALE3) +5.49%
• CSN (CSNA3) +5.05%
• Braskem (BRKM5) +4.45%
• Usiminas (USIM5) +3.88%

biggest casualties

• Espadrilles (ALPA4) -6.91%
• Pan Bank (BPAN4) -5.22%
• Minerva (BEEF3) -5.03%Stores
• Renner (LREN3) -4.05%
• Iguatemi (IGTI11) -3.60%

fed

In the previous week, the market continued to price in a possible interest rate hike in the United States after the monetary policy meeting of the US central bank and its statement, released on Wednesday (27).

The document did not bring great news to investors, with the fed keeping interest rates in the range between 0% and 0.25%, but stating that it hopes to have the necessary conditions to raise rates “soon”. Expectations are high at the March meeting.

The milder tone of the statement even boosted the stock exchanges, but the indices fell with the stricter content of the institution’s president, Jerome Powellat the press conference shortly afterwards.

The prospect of rising interest rates increases the attractiveness of fixed income over equities in the United States. At the same time, it can make investors seek more resilient and cheaper marketssuch as Europe and emerging markets, and migrate to rising assets, such as commodities.

Any rise in interest rates in the country, however, may affect investments in Brazilas it makes US Treasury bonds even more attractive to investors.

*With information from Priscila Yazbek and Reuters