What happened
Bets on Brazilian interest rates moved the market. Analysts consulted by the Central Bank now predict interest rates of 9.5% per year at the end of 2024 and 9% in 2025. This confirms what had been circulating among investors for days: “a single-digit Selic at the end of this year is much less guaranteed than around two weeks ago”, explained Levante Investimentos in a report to clients.
Higher interest rates in Brazil tend to favor the real. This happens because the high Selic level preserves the profitability of the fixed income market, attracting foreign investors. This impulse may not be effective if it is motivated by a deterioration in fiscal risk, as this is also a factor taken into consideration by financial agents when choosing where to invest.
The fall in iron ore pulled Ibovespa down. The second day of decline — almost 2% — in commodity prices in China affected shares of companies such as Vale (-1.01%), Gerdau (-3.82%) and Usiminas (-13.72%). The latter was also impacted by the release of its latest balance sheet, which showed a 47% drop in operating results measured by adjusted EBITDA in the first three months of the year.
Expectations continue for more economic data from the US. The market is waiting for the American GDP (Gross Domestic Product) numbers for the 1st quarter, which will be released on Thursday (25), and inflation measured by the PCE, which will be released on Friday (26). Data published in recent weeks made investors postpone bets on an interest rate cut by the Fed (Federal Reserve, the US Central Bank) until September.
Shares were impacted by increased expectations for inflation in 2024 and 2025, in addition to questions about the pace of interest rate cuts in Brazil. This scenario raises future rates, increasing the cost of capital, which can reduce the profit margin of retail companies and discourage investment.
Lucas Almeida, partner at AVG Capital, told UOL
Tags: Dollar falls R5 .13 interest rates Stock market retreats
