Ibovespa drops with commodities; dollar operates in fall before Copom meeting

O dollar fell 0.61%, quoted at R$ 5.142, around 12:10 pm on Monday (1st), with high volatility in the session. The currency is underperforming overseas as the market keeps betting on a Less aggressive interest rate hike cycle us United States .

At the same time, the Ibovespa retreated 0.16%, to 103,009 points, pulled down by the negative performance of shares linked to iron ore and oil, such as Vale and Petrobras, which follow the drop in the prices of these commodities due to the prospect of lower demand in China following industrial production data.

However, the fall is alleviated by the rise of shares in sectors more linked to the domestic scenario, such as retail and energy, with the interest rate on the radar.

The focus of Brazilian investors is the meeting of the Monetary Policy Committee (Copom ) which starts next Tuesday (2). The expectation is that the basic interest rate, the Selic rate rise 0.5 percentage point to 13.75%, with Central Bank officials signaling the end of the cycle of interest rate hikes in Brazil as inflation shows signs of falling.

O central bank will hold an auction of up to 15 thousand traditional foreign exchange swap contracts in this trading session for the purpose of rolling over the maturity date of September 1, 2022.

On Friday (29), the dollar rose 0.21% to R$ 5.172, ending the week with a fall of 5.91%, the biggest devaluation recorded in the accumulated five days since November 6, 2020. Ibovespa rose 0.55% to 103,164.69 points on the day, with a weekly advance of 4.29%, the best performance since March 2021.

overall feeling

Strong global risk aversion by investors, triggered by fears about a possible widespread economic slowdown due to a series of interest rate hikes around the world to contain record levels of inflation, has eased in recent days, reflecting expectations of a cycle of interest rate hikes. less aggressive in the United States.

The process of raising the US rate continued in July with a new increase of 0.75 percentage point. However, the Federal Reserve has signaled that it may make smaller hikes as the country’s economy already shows signs of slowing, seeking to avoid a recession.

Higher interest rates in the United States attract investments to the country’s fixed income due to its high security and favor the dollar, but harm bond markets and stock exchanges around the world, including the US.

Investors also monitor the state of the economy of China , which also shows signs of a slowdown linked to a series of lockdowns in relevant cities. The Chinese government is expected to intensify an effort to stimulate the economy, which should help maintain high demand for commodities.

In the domestic scenario, the Benefits PEC which creates or expands social benefits with an estimated cost of R$ 41 billion, was poorly received by the market, as it reinforces the fiscal risk by bringing new spending above the ceiling.

The Ibovespa and the real were harmed by the scenario, but an apparent greater optimism in the market has allowed a recovery, even if far from the levels of the first quarter of 2022, when they were benefited by the international scenario.

*With information from Reuters