Stock market today: Ibovespa operates on the rise with support from New York and the dollar approaches R$5.10; Casas Bahia (BHIA3) rises almost 17% after debt agreement

SHORTEST WEEK FOR BRAZIL AND FOMC WEEK FOR THE USA

The last week concluded with a reduction in market concerns about the Federal Reserve’s monetary policy, following the release of the March PCE index, which came in line with expectations and presented a milder scenario than the increase observed in the quarter, reported together with GDP on the previous Thursday.

While the overall outlook remains challenging, with the Fed meeting scheduled for this week (Wednesday and Thursday) projecting a more contractionary (“hawkish”) tone, we begin this new week on a relatively more stable footing.

In Brazil, the reaction to this meeting will only be assessed on Thursday, due to the markets closing on Wednesday due to a national holiday.

Additionally, this week’s focus will include the US employment report, due out on Friday, which will provide additional clues on the future direction of US monetary policy.

The data is expected to show another month of robust employment growth, which does not simplify the situation.

At the same time, the financial results season continues both in Brazil and internationally. In a global context, it is important to note the results of two of the companies in the “Magnificent Seven” group, with Amazon announcing its results on Tuesday and Apple on Thursday.

Other notable companies such as Eli Lilly, ConocoPhillips, Pfizer, Coca-Cola, McDonald’s and Starbucks will also release their results this week.

Asian shares had a positive performance this Monday, a movement that is also reflected in European markets and American futures this morning.

Seeing…
00:55 — Giving more ammunition to the BC

Last Friday, the optimism that permeated international markets, especially after the encouraging results in the US technology sector and a PCE index in line with expectations (less alarming than feared), also reverberated in stock markets around the world .

In Brazil, the main stock market index, after three weeks of consecutive falls, recorded a weekly gain of 1.12%.

Furthermore, April’s IPCA-15 attracted attention, which, registering 0.21% in the monthly comparison, was below what the market predicted. This slowdown, compared to 0.36% in March, was primarily influenced by the reduction in the prices of food at home and gasoline.

This situation could open space for the Brazilian Central Bank to proceed with a 50 basis point cut at the next meeting in May, before a possible pause in the adjustment cycle, pending developments on interest rate cuts in the US.

This week, which will be shorter due to the Wednesday holiday, will be marked by the release of significant financial results, with Santander on Tuesday and Bradesco on Thursday.

Other relevant metrics to be observed include the IGP-M, Caged, Pnad Contínua, data from the external sector and industrial production.

Regarding the labor market, the net creation of 230 thousand jobs is expected, with the March unemployment rate estimated at 8.1%.

A result as expected or lower than expected could support the possibility of a 50-point cut in the Selic next week. However, this movement will still depend on other factors, such as the international scenario and the fiscal environment.

In this sense, the National Treasury will release the central government’s primary result for March today. We will be attentive to check whether revenue continues to exceed expectations, albeit less significantly than in the first months of the year.

Robust data in this regard could ease pressure on the yield curve.

01:51 — Waiting for the Fed’s tough reaction

Last Friday, in the United States, the publication of the PCE price index, which is the Federal Reserve’s preferred measure of inflation, revealed persistence in rising prices, a figure that, although stubborn, was received with a certain indifference by the market of shares, as it met expectations and mitigated exacerbated fears about the future of inflation.

Furthermore, positive contributions from giants such as Alphabet and Microsoft, which surpassed forecasts with their results, also helped to sustain market sentiment, as we anticipated here at M5M+.

The week also begins with news in the banking sector: American regulators are on the verge of taking control of Banco Republic First Bancorp, located in Philadelphia, with advanced plans for its sale to another financial institution.

This is the fourth incident of bank collapse in the US since last year, with problems similar to those faced by other regional banks: asset depreciation due to rising interest rates and a high proportion of unsecured deposits that can be quickly withdrawn.

Although serious, this situation should not cause much alarm, considering that other concerns predominate in the scenario.

This week is marked by the Federal Reserve meeting, which is not expected to change interest rates, but whose tone adopted by President Jerome Powell in his press conference will be crucial in deciphering the future direction of interest rates. This press conference is scheduled to take place on Wednesday afternoon, following the announcement of the rate decision.

Furthermore, the week still holds the release of more significant corporate results and the April employment report.

The job market remains robust, but any sign of weakening, even if slight, could be enough to improve the current economic scenario.

02:47 — A boost in semiconductors

In 2022, the US Congress, with bipartisan support, passed the CHIPS and Science Act, a bold initiative to boost domestic production of a component critical to national security: semiconductors. Two years after enactment, more than half of the US$39 billion in incentives have already been distributed.

The program is showing positive results: companies in the semiconductor sector and their suppliers have announced investments of around US$327 billion in the United States for the next decade. This initiative also led to a fifteen-fold increase in the construction of computing and electronic device manufacturing facilities.

By 2030, it is estimated that the United States will be responsible for producing approximately 20% of the most advanced chips.

Semiconductors are essential to a wide range of everyday products, including automobiles, global production of which fell by 26% in 2021 due to a lack of these components.

However, it is the use of semiconductors in critical sectors such as the military, data centers and telecommunications that has motivated Congress to act to ensure that the US maintains its technological superiority over China.

Therefore, it is crucial to maintain a robust and efficient supply chain.

This is an example of nearshoring, which we discuss often. Part of this strategy is implemented in the United States itself, while another extends to partners such as Mexico. This significant increase in capital investment may also have an inflationary impact, suggesting that in the coming years both inflation and interest rates may be higher than previously.

It is also interesting to note that many of the new factories are being built in swing states in the elections, the so-called swing states (the planned factories are vast and have the potential to transform regional economies).

03:42 — 24-hour stock market?

The New York Stock Exchange (NYSE), part of the Intercontinental Exchange (ICE) group, has begun a consultation with stock market participants on the feasibility of 24-hour trading. This consultation takes place at the same time that regulators are evaluating in detail a proposal from a startup that intends to create the first stock exchange to operate 24 hours a day, 7 days a week.

The NYSE’s interest in exploring the trading of shares of large companies such as Nvidia or Apple during the night, specifically between 8 pm and 4 am Eastern Time, reflects a growing curiosity on the part of investors.

Today, retail brokerage platforms like Robinhood and Interactive Brokers already enable seamless access to the U.S. stock market, allowing trades to occur both internally and through alternative trading venues known as “dark pools.”

These locations are especially popular with Asian retail investors, who trade outside of standard stock exchange hours.

Implementing an exchange that operates continuously overnight would represent a significant transformation, due to the strict regulatory control that exchanges are subject to, unlike dark pools. Despite the fascination with this idea, I am skeptical about its practical realization.

04:33 — A new engine of growth for the world

In the past, I have discussed India’s remarkable potential. Currently, while China occupies the position of second largest global economy, India, which is in fifth place, still has a considerably smaller economic scale.

However, with a GDP growth rate of over 7%, India is on a trajectory that could see it overtake both Germany and Japan in the coming years. Some economic sector analysts project that India could overtake China as the main driving force of global economic growth as early as 2028.

It is worth noting that, even in this scenario, the Indian economy would still be smaller than the Chinese economy in total size; I am referring to the country as a catalyst for global GDP growth.

Currently, this role is played by China, but this may not last much longer.

The competition between India and China is not just a regional Asian issue, but an issue of global relevance. This is evidenced by the fact that US Treasury Secretary Janet Yellen has visited India four times in less than a year, a show of US support for moving part of global supply chains out of China.

At the same time, both countries face their own challenges, it is true. India grapples with significant social problems arising from its vast population, while China faces a troubled housing market that has been a drag on its growth and consumer confidence.

In this geopolitical context, India tends to align itself more closely with the US than with China. In this scenario, even Brazil could benefit from expanding trade with these countries.