Stock market today: Wall Street and banks give a ‘push’ and Ibovespa closes higher; dollar falls

COOL TEMPERATURE: JUST WAITING FOR THE RIGHT MOMENT TO MAKE THE PLAY

At this quiet time in the economic calendar, international markets are subtly tilting towards cautious optimism, particularly in Europe and US market futures.

This Wednesday’s agenda does not feature any major highlights, except for the observation of consumer inflation in Spain in March, which promises a slight overall increase and a subtle decrease in underlying inflation.

At the same time, Sweden is focusing on setting its interest rates, without expecting major deviations from its current monetary policy, although recent actions by the Swiss National Bank may subtly influence future decisions.

Asian markets, reflecting Wall Street’s recent pullback, grapple with consolidating gains in the technology sector and anticipation for crucial inflation data and Federal Reserve speeches.

Speakers from central banks, especially the European Central Bank, are expected to speak today, bringing valuable perspectives.

In the commodities scenario, oil falls, leaving behind the US$86 per barrel mark, while iron ore shows volatility, approaching US$100 per ton again after a brief recovery.

Seeing…

00:54 — I remain concerned about the Brazilian fiscal situation

Yesterday, Ibovespa ended the day without a clear direction, reflecting an environment of prudence in the global market panorama.

The main index of the Brazilian stock exchange recorded a slight drop of 0.05%, standing at 126,863 points.

This reaction from investors came in the wake of the revelations in the Copom minutes and the March IPCA-15 data, both pointing to a persistent inflationary scenario that could influence the slowdown in the process of reducing the Selic rate.

The performance of Ibovespa was also negatively influenced by the shares of Vale and Petrobras, which suffered from the drop in iron ore and oil prices on the international market. This pattern may continue today, given the new devaluation of these commodities.

For today, the economic agenda foresees the release of the IGP-M for March and the Caged data for February.

On the other hand, the publication of yesterday’s Copom minutes did not change my forecast for the Selic rate at the end of the adjustment cycle. I maintain the perspective that a final Selic of 9% is still viable, despite the more cautious environment.

The external scenario, including the monetary policies of developed and emerging nations, together with the internal context, marked by a complex fiscal framework and resilient inflation, presents additional challenges to the Central Bank.

The latter, in turn, chose not to intensify the debate with the government and did not make a direct connection between local challenges and the fiscal environment. Such a stance is justified; Roberto Campos Neto has collaborated closely with the government in the quest to increase the independence of the Central Bank, making any confrontation with President Lula inappropriate at this time.

However, Minister Haddad himself acknowledged that the fiscal target for next year could be less than 0.5% of GDP, reflecting the complexity of the necessary balance between fiscal targets and monetary policy autonomy.

01:49 — Preparing for a noisy start to April

In the United States, a selling movement in the final moments of yesterday’s trading session pushed the main stock market indices into negative territory, interrupting the initially positive momentum.

The reversal was not triggered by a single determining factor, but rather by a certain apprehension regarding the upcoming period of intense activity.

Currently, the market is in a phase of uncertainty, with no clear direction, while indices fluctuate near their record levels, on the eve of the release of the February personal consumption expenditures (PCE) price index, the preferred measure of the Fed to assess inflation.

The current week, shorter due to the holiday, precedes a flurry of relevant data in the first half of April, including employment figures and the consumer price index, both from March.

The minutes of the latest Fed meeting and a new monetary policy decision by the European Central Bank are also on the radar, keeping investors attentive to the macroeconomic outlook until the start of the first quarter earnings season, with the main American banks releasing their numbers at from April 12th.

For the season, earnings growth is expected to slow compared to the robust performance seen in late 2023.

Earnings per share for S&P 500 companies grew 10% year over year in the fourth quarter, accompanied by a 4% increase in revenue, a result that doubled analysts’ forecasts weeks before the numbers were released.

For the first quarter of 2024, an increase of 5% in earnings per share is projected for companies in the S&P 500, anticipating this to be the lowest growth point of the year, followed by a recovery in subsequent quarters.

02:35 — Time bomb

The director of the United States Congressional Budget Office (CBO) has issued a warning about the growth trajectory of the national debt, drawing an alarming parallel with the financial crisis briefly faced under the leadership of Liz Truss in the United Kingdom.

Although the United States can theoretically manage a debt-to-GDP ratio of up to 150% or 200%, the acceleration of debt raises doubts about the country’s future ability to honor its financial commitments.

The power-sharing structure and intense political polarization complicate budget rebalancing efforts, as legislators tend to inflate the budget with measures that directly benefit their constituents.

This dynamic has transformed budget impasses and government shutdowns into recurring events.

Larry Fink, CEO of BlackRock, qualifies the current American debt scenario as the most critical he has ever seen, suggesting that the only way out to prevent a crisis would be real economic growth of 3% per year over the next half decade.

However, achieving such growth is challenging in the face of the aging American workforce. Since the beginning of the pandemic, the United States has accumulated more than US$11 trillion in new debt, worsening the scenario with the interest rates that the National Treasury needs to pay for this debt.

Historically, the government refinances old debt by issuing new Treasury bonds, but there is uncertainty about whether investors will continue to be interested in absorbing such a large volume of bonds at current rates.

One of the latent risks is that the US economy will face a fate similar to that of Japan in the 1990s, marked by periods of austerity and economic stagnation, making it even more difficult to control inflation.

03:21 — Logistical problems

Early yesterday, Baltimore faced a serious incident with the deaths of at least six people, following the collision of a container ship that lost power and hit the Francis Scott Key Bridge, resulting in its significant destruction.

The vessel, which was destined for Sri Lanka, remained adrift, while the 2.5 km bridge quickly collapsed, dragging both construction workers and vehicles traveling at night into the waters of the Patapsco River.

The disaster, which occurred on a critical route for maritime trade, promises to have far-reaching repercussions, affecting the local economy and global supply chains, with effects expected to last for weeks.

The bridge, in addition to being a vital transportation structure, connecting the I-695 highway and dividing the waters near the Port of Baltimore from the ocean, is essential for maritime flow. As long as the rubble remains, it will be necessary to reroute maritime traffic from the intensely active port.

The human impact of the incident could have been even greater. Baltimore has long stood out as the main US port for importing and exporting automobiles, with around 850,000 vehicles passing through last year.

Some vehicle manufacturers have already signaled the use of alternative ports, however, possible delays in the delivery of components could compromise the automotive sector’s supply chains, which are notoriously dependent on tight deadlines.

As the closest port to the Midwest on the East Coast, it is also the largest shipping point for agricultural machinery and agricultural products in the country.

It is estimated that up to 2.5 million tonnes of coal, thousands of Ford Motor and General Motors vehicles, as well as loads of wood and plaster face disruption risks. Reconstruction of the bridge is a process that could take years.

04:13 — The pension issue

Larry Fink, the billionaire co-founder and CEO of BlackRock, emphasized in his annual letter to investors a concern that has been discussed here repeatedly: the unlikelihood that future generations will be able to retire.

In the document, Fink addresses the urgent need for governments and corporations to address the escalating pension crisis.

He attributes part of the responsibility to the baby boomer generation (his own generation), who, according to him, prioritized their financial well-being to the detriment of future generations. Now the challenge is monumental.

In the United States, for example, data from a survey conducted in 2022 reveals that approximately 50% of citizens between the ages of 55 and 65 do not have any financial reserves earmarked for retirement.

The situation is even more critical in developing nations, such as Brazil. Significant reforms to pension systems are needed, including the transition to funded schemes and raising the minimum retirement age.

If the US does not promote adjustments to its current model, it will face the exhaustion of funds intended for the payment of benefits as early as 2034. The debate cannot be postponed any longer.