Ibovespa operates up more than 1%; dollar retreats

THE Ibovespa operates up 1.70%, at 107,454.52 points, around 11:14 am, Brasília time, this Friday (13). The main B3 index interrupted a series of weekly declines and was on its way to closing at the highest level of the week.

What favors the Brazilian stock market this morning is the relief of the North American markets after the speech of Jerome Powell, chairman of the Fed, in relation to inflation.

The most traded in the first hour of the day are the shares of Magazine Luiza, Cogna and Oi. Gol shares opened the day up more than 5%, two days after the announcement of the creation of a holding company with Avianca under which the two aviation groups will share the same business platform.

In turn, the dollar against the real, but was still on track to mark its fourth consecutive weekly appreciation, after being supported in recent days by fears about sharper interest rate hikes in the United States and risks of a slowdown in the global economy.

At the same time as the Ibovespa, the US currency was down 0.49%, quoted at R$5.106.

THE central bank will auction up to 15,000 traditional foreign exchange swap contracts in this trading session for the purpose of rolling over the maturity date of July 1, 2022. The BC operation can help to provide liquidity in the currency, but experts consulted by the CNN Brasil Business point out that the BC could act more to contain exchange rate volatility .

fed

Calling price stability the “building block” of the economy, the central bank chief said the Federal Reserve’s battle to rein in inflation “will include some pain” as the impact of higher rates is felt, but that the worse outcome would be if prices continued to accelerate.

“We fully understand and recognize how painful inflation is,” Powell said in an interview with the Marketplace radio show. He repeated his expectation that the Fed will raise interest rates by 0.50 percentage point at each of its next two meetings, but promised that if the data turns the wrong way “we are prepared to do more.”

“Nothing in the economy works, the economy doesn’t work for anybody without price stability,” Powell said. “We went through periods in our history where inflation was quite high… The process of bringing inflation down to 2% will also include some pain, but in the end the most painful thing would be if we didn’t deal with it and inflation took root in economy at high levels, and we know what that’s like. And that’s just people losing the value of their wages.”

effects in the real

Returning to R$ 5, the dollar reversed part of the gains that the real obtained in the first months of the year due to a combination of factors that influenced the flow of purchase and sale of the currency.

To the CNN Brasil Business experts associated this recent appreciation to two main factors: the prospect of higher interest rate hikes in the United States and fears regarding the lockdowns established in a number of economically relevant cities in China .

Higher US interest rates tend to attract investments to the country’s Treasury bond market, drawing capital from markets considered riskier than U.S the case of Brazil.

The measures to control the spread of the Covid-19 in China, which affect cities like Shanghai and Beijing, tend to reduce the world’s second-largest economy’s demand for commodities harming its main suppliers, including Brazil, and negatively influencing the prices of these products.

global pessimism

The most recent instigator of global risk aversion was the interest rate hike in the US announced by Federal Reserve on Wednesday (4). Despite discarding hikes of 0.75 pp or a risk of recession, the municipality signaled at least two more hikes of 0.5 pp

Higher interest rates in the United States attract investments for the fixed income of the country due to its high security, but it harms the exchanges around the world, including the North American ones.

Along with a series of interest rate hikes around the world, lockdowns in china to try to contain Covid-19, projections of a strong economic slowdown are increasing, hurting markets.

The growth of exports Chinese companies slowed to single digits, the weakest level in nearly two years, while imports barely changed in April, amplifying economic concerns.

*With information from João Malar, CNN Brasil Business, and Reuters