TOMORROW WILL BE A HOLIDAY IN BRAZIL, BUT THE WORLD WILL CONTINUE ROTATING OUTSIDE
Although the Brazilian market will not operate tomorrow due to the Labor Day holiday, the international agenda will continue to be full of significant events, including the analysis of international corporate results and the repercussions of the deliberations of the monetary policy meeting of the Federal Open Market Committee (FOMC) of the Fed in the USA.
The main issue will not involve changes to interest rates, which are expected to remain stable between 5.25% and 5.50% per year, but the focus will be on the nuance of Jerome Powell’s speech during his press conference following the decision.
While a more cautious tone is anticipated, only a drastic change in its approach could bring surprises.
Regarding today’s agenda, there is emphasis on the GDP of several European countries such as France, Spain and Italy, in addition to the consolidated GDP of the Euro Zone, which will also report inflation data.
In Europe, we will still have the UK retail price index for April released.
In the Asian scenario, stock markets rose this Tuesday, despite the lower-than-expected results for retail sales in Japan, where there was no reduction in unemployment in March.
Also notable is China’s manufacturing PMI, which reached its highest level since the beginning of last year.
In the United States, the day reserves indicators of economic activity, consumer confidence and Amazon’s financial results, which will be announced after the market closes, along with other important quarterly results.
Among commodities, oil rose again today.
Seeing…
00:47 — Employment data after frustration with the government’s result
Yesterday, in Brazil, optimism prevailed in the markets, driving the Ibovespa to close above 127 thousand points.
This movement was strongly influenced by the shares of Vale and Petrobras, which recorded significant gains, contributing significantly to the increase in the index.
Today, the release of Santander’s results, which were now released before the market opened, as well as the reactions to Petrobras’ operational performance, which met expectations, are highlights.
However, the main focus of the day falls on employment data. The journey begins with the release of Pnad Contínua by IBGE, which should reveal an increase in the unemployment rate, a movement considered normal for the period.
Next, Caged should show the net creation of 190 thousand formal jobs in March. A substantially higher-than-expected result could discourage the BC from proceeding with another 50 basis point interest rate cut next week.
Yesterday it was also reported that the central government presented a primary deficit of R$1.5 billion in March, a result worse than the surplus expected by the market.
Although this discrepancy was seen as an isolated event, with no major impact on the positive trend in revenue, it still raises concerns.
At the same time, the government is negotiating an agreement on tax relief for municipalities and companies, which represents a considerable fiscal challenge.
Looking to the future, the main concern is with mandatory expenditure on Health and Education, which threatens to compromise the fiscal framework next year.
There are discussions about the possibility of using the flexibility of the framework to adjust funding for Education (yet another adjustment).
The challenging fiscal outlook tends to add an extra premium to the yield curve, reflecting market uncertainties.
01:51 — What to expect from the FOMC?
Yesterday, in the United States, stock indices closed with modest gains. However, this slight increase should not generate excessive enthusiasm, as futures operate with slight corrections this morning.
This week is particularly busy for the market, with more than 150 S&P 500 companies scheduled to announce their quarterly results, including big names like Amazon today and Apple on Thursday.
Furthermore, employment data and, more crucially, the Federal Reserve’s monetary policy meeting, which begins today and whose results will be released tomorrow, are eagerly awaited.
Futures market forecasts unanimously indicate that there will be no changes to interest rates at this meeting, with expectations of cuts possible only from September onwards. The main focus is therefore on Jerome Powell’s press conference.
Recently, several policymakers have publicly expressed the need for more consistent evidence that inflation is moving sustainably toward the 2% annual target following elevated readings in early 2024.
For now, the Fed’s stance is cautious, maintaining rates while observing the robustness of the job market and economic growth, which indicate that there is no urgency to reduce interest rates immediately.
Tomorrow’s meeting will therefore focus primarily on any changes to the language used by the Fed to describe inflationary expectations.
Powell is not expected to provide specific details on the timing of future rate changes, emphasizing instead policymakers’ cautious, data-driven approach.
02:42 — Chinese robustness
On Tuesday, China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indices rose slightly, reflecting investors’ reaction to a series of mixed purchasing managers’ index (PMI) results for April.
Official data indicated a less pronounced slowdown than expected in industrial activity in April compared to March.
The PMI/S&P and Caixin advanced from 51.1 in March to 51.4 in April, while the PMI/NBS decreased to 50.4 in April, from 50.8 in March.
Although the PMI results offered a relatively positive outlook for the industrial sector, general indicators pointed to a certain cooling in economic activity after a robust first quarter.
Despite this, the recovery trend in Chinese stock markets continued throughout April, with local indices outperforming their regional peers during the month. The CSI300 registered a 2.5% increase in April, and the Shanghai Composite grew 2.6%. The Hong Kong index advanced 0.6% on Tuesday alone and stood out as the best Asian performance in April, accumulating an appreciation of 7.6%.
It is important to highlight that the Chinese economic recovery was accompanied by an increase in iron ore prices, which surpassed the mark of 116 dollars per ton.
This increase directly benefited Brazilian companies, including Vale, supporting the Ibovespa.
03:35 — ChatGPT’s efforts
ChatGPT has stood out as the most active assistant in universities today.
Last year, high school and university students submitted more than 22 million works that used some form of generative artificial intelligence, according to data from Turnitin, which identifies plagiarism and the use of AI in academic texts.
Since generative AI tools became popular on the internet approximately a year and a half ago, several educational companies have developed AI detection tools to assist teachers.
Turnitin, for example, analyzed more than 200 million jobs in 2023, identifying that 11% of these jobs have up to 20% AI-generated content, while 3% contain at least 80% AI-generated content.
Current AI detection tools still face challenges in terms of reliability, not being as effective as plagiarism detection systems, and false positives can compromise students’ academic trajectory.
There is evidence of bias in the algorithms, particularly in relation to texts from non-native English speakers, where studies have indicated a 61% false positive rate in university entrance exams, although Turnitin claims its false positive rate is just 1. % (the company also acknowledges that its AI tool is not infallible).
Even with a potentially high margin of error, the implications are significant.
Therefore, it is crucial that specific regulations for the use of AI in the educational environment are established quickly, to prevent the situation from becoming uncontrollable.
04:29 — Succession in Taiwan
In May, William Lai is expected to assume the presidency of Taiwan following his election victory earlier in the year. To China, Lai is seen as a separatist, and he sees little benefit in trying to convince Beijing otherwise.
His inauguration speech, scheduled for May 20, will likely lay the groundwork for a gradual deterioration in cross-Taiwan Strait relations over the course of his four-year term.
Tensions are expected to rise later this year as China intensifies its incursions into Taiwan’s contiguous zone, challenging the island’s recognized maritime and air borders.
While these actions will be carefully monitored in Washington through indirect channels to minimize backlash, Lai could escalate the situation by pressuring President Biden to show firm support for Taipei, which could begin a dangerous cycle of escalation.
However, despite these tension points that could disrupt bilateral relations, there are still many reasons for both leaders to want to maintain relative stability, especially during the US elections.
After all, Biden needs to avoid starting a new international conflict while already facing involvement in others, such as Ukraine and Israel.
Tags: Stock market today eve Fed Ibovespa retreats accumulates drop April dollar advances month
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