IF YOU RUN THE BEAUTIFUL CATCHES IT, IF YOU STAY THE BEAUTIFUL EAT IT
This Wednesday, the focus is on Jerome Powell, president of the Federal Reserve, who will discuss the economic outlook.
He is expected to offer insights into the relationship between Fed policy and recent employment data, although his comments are likely to align with expectations for three interest rate cuts over the course of the year, echoing the lines of other members from the Fed.
There is a latent concern that if interest rate cuts do not begin between June and July, they could be delayed until after the elections next year.
Furthermore, attention turns to March inflation in the Euro Zone.
Another point of interest is the ADP report on US private sector employment for March.
At the same time, markets in Asia and the Pacific fell, influenced by an unfavorable night on Wall Street, highlighted by the fall in shares of electric vehicle manufacturers, such as Tesla, BYD, Nio and Li Auto, due to concerns about demand. .
The situation was exacerbated by a 7.5 magnitude earthquake in Taiwan, triggering tsunami warnings of up to 3 meters for Okinawa, Japan, and contributing to negative weather that is also affecting commodity performance.
Seeing…
00:51 — Political complications
On Tuesday, the Ibovespa registered an increase of 0.44%, reaching 127,548 points, detaching itself from the New York indices, which ended the day in decline.
The positive performance of the Brazilian stock exchange was driven by the good moment in commodities, mainly benefiting the shares of Petrobras and Vale.
On the other hand, the dollar had a slight retraction of 0.02%, being traded at R$5.05, following action by the Central Bank. One point of attention was the fall in Enauta shares, after the announcement of a proposed merger with 3R Petroleum.
Today, the spotlight turns to February’s industrial production data and the presence of Campos Neto at an event organized by Bradesco BBI.
The climate among investors is tense, mainly due to concerns about the domestic fiscal scenario. The proposed payroll tax relief for municipalities appears as yet another potential point of friction between the government and Congress.
At the government level, pressure is intensifying on Petrobras’ leadership, with rumors about possible replacements for Prates, including Bruno Moretti, current Special Secretary for Government Analysis of the Presidency of the Republic, and Magda Chambriard, former president of the ANP.
President Lula recently criticized the privatizations and sale of assets promoted by the previous administration, in addition to defending the Brazilian naval industry, suggesting a new cycle of investments in this area, despite the historical difficulties of success.
Meanwhile, the market is focusing on fiscal accounts and the trajectory of monetary policy, with interest rates rising for the fifth consecutive day and real long interest rates approaching 6%, highlighting the growing stress in the economic environment.
We are once again talking about an interest rate cut cycle in two stages, the first being up to 9.5%, this year, and the second beyond that, next year. Something that depends on the interest cycle out there, of course.
01:43 — The market is still very strong
Last week, which marked the end of the first quarter, the Dow Jones Industrial Average flirted with the possibility of crossing the 40,000-point mark for the first time in history.
However, this objective now appears more distant, after the index fell significantly on two consecutive trading days, impacted by apprehension surrounding recent employment data in the United States.
This risk aversion scenario was not just limited to the Dow Jones, it also affected the S&P 500 and the Nasdaq, which also went through a period of profit taking.
Parallel to this, a renewed vigor in the American economy boosted interest rates on 10-year bonds to 4.363%, the highest level since the end of November, despite job vacancies in February remaining practically stable compared to the previous month. (the reading ended up signaling a persistent job search at high levels).
Additionally, this increase in yields follows the release of last Friday’s personal consumption expenditures price index, which remained elevated, as well as a report from the Institute for Supply Management indicating that the manufacturing sector has returned to the expansion phase for the first time. time since September 2022.
These data reignited concerns about inflationary pressure.
Recently, two members of the Federal Reserve expressed the expectation that the institution could carry out up to three reductions in interest rates in 2024, although they did not demonstrate urgency to begin this process of monetary easing.
There is a latent concern that a prolonged delay in reducing interest rates could make cuts unfeasible later this year.
On the day’s agenda, the ADP report on jobs in the private sector and the Services PMI for the month of March are eagerly awaited, whose higher-than-expected results could be poorly received by the market.
02:37 — The gold rally
Gold reached new heights yesterday, marking its sixth consecutive session of gains and reaching a new price record.
This advance was driven by the devaluation of the dollar in relation to other currencies and the reduction in interest rates on short-term Treasury bonds, despite the increase in interest rates for longer terms.
The June gold contract closed with an increase of 1.09%, settling at US$2,281.8 per troy ounce.
The intensification of geopolitical tensions in the Middle East contributed to this appreciation, especially after the Israeli attack on an Iranian representation in Syria, which stimulated the search for gold as a safe haven.
There is also a constant demand for the metal from central banks in China and India.
In retrospect, gold has outperformed the S&P 500 since the Federal Reserve began interest rate hikes.
As of the beginning of 2022, gold has appreciated by around 20%, while the S&P 500 has registered an increase of 14% in the same period.
This moment represents the most favorable phase for gold in eight years, based on the widely held expectation that the Federal Reserve will begin reducing interest rates as early as June, enhancing gold’s appeal as an investment option.
However, if interest rates are not cut as anticipated, gold could face an adverse scenario.
03:25 — And oil flirts with US$90 per barrel
Oil prices recorded another session of advances, with WTI surpassing the US$85 mark for the first time since last October, while Brent approached US$90 per barrel.
The depreciation of the dollar, which generally favors commodities, and the anticipation that OPEC+ will probably maintain its supply cuts during the next meeting contributed to this increase.
Pemex, a Mexican state-owned company, announced plans to reduce its oil exports with the aim of meeting domestic demand and possibly reducing the costs of oil products in the local market, with an eye on the June 2 elections.
Furthermore, the increase in geopolitical tensions, especially after Israel’s attack on an Iranian facility in Syria, added a risk premium to barrel prices.
US President Joe Biden expressed harsher criticism of Israel’s conduct in recent months, highlighting the insufficiency of efforts to protect civilians, in a context where Israel has intensified its military actions against Hamas in Gaza.
This scenario contributes to increasing tensions in the region. At the same time, signs of improvement in China’s economic indicators increase expectations of a recovery in demand from the world’s largest importer of crude oil.
04:14 — And the relationship between the two giants?
On Tuesday, US President Joe Biden and Chinese President Xi Jinping engaged in a direct telephone conversation for the first time since their meeting in California in November last year.
During the conversation, the two leaders strived to maintain a semblance of diplomatic cordiality, despite the marked distrust that persists between the two nations, in a scenario where both parties continue to implement export controls, sanctions and tariff impositions.
They also sought to find points of consensus on crucial topics such as the challenges brought by artificial intelligence and the fight against drug trafficking, especially in relation to fentanyl, in addition to addressing the issue of divestment in the company TikTok, with Biden expressing his concerns regarding ownership Chinese app.
On the other hand, US Treasury Secretary Janet Yellen is scheduled to visit China this week, her second in less than a year, with the intention of discussing concerns related to excess Chinese productive capacity and its negative impacts on the global economy.
Yellen will travel to Guangzhou, a commercial and industrial hub in southern China, before heading to Beijing for further discussions.
This exchange of words occurred shortly before Taiwan was rocked by the most intense earthquake in two decades.
The event devastated dozens of buildings in the eastern part of the island, resulting in more than 50 injuries and affecting some semiconductor production lines.
As the island was prepared for this type of incident, more serious problems should be avoided.
Tags: Dollar approaches R5 .10 data USA Ibovespa drops Campos Neto Wall Street
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