Stock markets today: Ibovespa tests to support 129 thousand points with commodities and the dollar loses strength; Braskem (BRKM5) drops 15%

WE DREAM AGAIN ABOUT THE IDEAL SCENARIO

The past week was marked by intense activity and volatility for investors around the world, who remained vigilant in the face of the latest economic news from the United States, particularly in relation to the job market.

The press conference by Jerome Powell, president of the Federal Reserve, after Wednesday’s meeting was crucial in easing concerns, especially after the first quarter employment cost index indicated an increase above forecasts.

Powell minimized the chances of an interest rate increase this year, a relief for the market that feared just that. He also highlighted that interest rate cuts could occur if there was a significant decline in the job market.

Interestingly, on Tuesday, lower-than-expected employment data corroborated this perspective, leading the market to become excited again about the possibility of a rate reduction as early as September and December.

Earlier this week, holidays in Japan and the United Kingdom reduce liquidity in global markets. In the United Kingdom, by the way, attention turns to the monetary policy decision on Thursday.

Meanwhile, most Asian stocks posted gains this Monday, reflecting Wall Street’s optimism last Friday.

China will soon release crucial data such as its trade balance as President Xi Jinping makes an important visit to Europe this week.

In the euro zone and the United States, the economic agenda appears lighter, but will be moved by several scheduled appearances by Fed members, which could influence expectations following the weak employment data.

At the corporate level, more than 50 companies from the S&P 500 are scheduled to release their results, as well as several Brazilian companies.

To see…
00:56 — Looking forward to Wednesday’s Copom

In Brazil, after a favorable week for local assets, driven by a positive international scenario and the improvement in Moody’s outlook for the country — with expectations that Fitch will also improve its assessment soon — attention turns to Brasília.

The focus is on monetary policy, with the market divided between expectations of a Selic cut of 0.25 or 0.50 percentage points at the next Copom meeting.

The trend towards a more moderate cut of 25 points is strengthened due to the influence of external scenarios previously considered by the Central Bank.

However, given recent indicators — such as local inflation below expectations and the American job market showing less dynamism — I maintain an optimistic view that the 50-point cut can be confirmed, ideally accompanied by a more assertive statement.

Furthermore, the economic agenda still reserves the release of the IPCA for April on Friday. Expectations are for an increase of 0.38% in a monthly comparison, which would represent an acceleration in relation to the 0.16% observed in March.

This acceleration should be broad, influenced by factors such as adverse weather conditions affecting food consumed at home, the reduction in discounts applied in March on durable industrial goods, seasonal increases in clothing and pharmaceutical products, and the rise in fuel prices.

A result below expectations would be welcomed by the market, especially if there is a drop in core services inflation, as predicted by some analyses.

Completing the week’s agenda are data on retail sales, consolidated fiscal results, trade balance and the continuation of the results release season

01:49 — Mood change

In the US, after significant adjustments in April, the last week marked a turning point for financial markets.

Specifically in the last three days of the week, we saw an impressive rally in the two-year Treasury bond, which is particularly sensitive to interest rate expectations. This security rose more than 5% in anticipation of Wednesday’s Federal Open Market Committee (FOMC) meeting, reaching levels not seen since November, before settling to 4.70% following the US jobs report. Friday. In the end, it stabilized at a more moderate level of around 4.82%.

This move signals a desire by the Federal Reserve to ease monetary policy, supported by robust employment justifications that allow policymakers to move in this direction, thus halting the climb to 5% along the yield curve. The slowdown in employment added more arguments for optimists.

The US Department of Labor reported that the economy added 175,000 jobs in April, a number well below the 315,000 in March and lower than the consensus of economists, who expected around 235,000 jobs. The unemployment rate also increased slightly to 3.9% from 3.8% in the previous month.

Additionally, wage growth slowed to 0.2% from 0.3% in March. At the same time, the earnings season has shown positive performance, highlighted by the 6% increase in Apple shares on Friday.

Although all the main sectors of the S&P 500 registered gains that day, the technology sector stood out with an increase of 2.8%. More results are scheduled for this week, although the most significant of the season appear to have already passed.

02:37 — Sale in May?

There is an old saying that is quite popular in financial circles, especially in the United States: “Sell in May and go away.” This high suggests that investors should liquidate their positions in May and return to the market after a supposed decline in prices during the summer months, based on the belief that the market tends to perform worse from May to October.

The origin of this saying goes back to ancient practices, influenced by factors such as holiday cycles and bonus periods, as well as historical observations that major market crashes, such as the 1929 crash and Black Monday of 1987, occurred in between.

Extensive academic research and market studies have been carried out on this strategy, analyzing its impact on different share classes and specific periods.

Although some seasonal patterns are recognized and there is a slightly higher risk in the summer months, stocks generally trend higher over the long term, overcoming seasonal volatility.

Therefore, keeping investments active throughout the year may be more prudent than trying to predict the market, especially considering other more reliable indicators for decision making, such as company profitability, market valuations and interest rate trends.

Historically, over the past 40 years, the strategy of selling in May has proven ineffective, with the S&P 500 index recording positive returns in more than 75% of these periods. This old strategy, therefore, seems to have lost its foundation in modern practice.

03:24 — Logistical problems and prospects for peace

The Maersk group, a key player in global trade, warned that disruptions to maritime transport, caused by Houthi militant attacks on ships in the Red Sea, were likely to persist until the end of the year.

Since December, Maersk and other companies in the sector have redirected their shipping routes to bypass Africa, thus avoiding Houthi attacks in the Red Sea.

This change has resulted in extended travel times and, consequently, an increase in freight rates.

The attacks significantly reduced the flow of containers through the Suez Canal, with a drop of approximately 80%.

Additionally, persistent droughts have restricted navigability through the Panama Canal, and the destruction of the Francis Scott Key Bridge has limited access for large ships to the Port of Baltimore, further complicating the global logistics scenario.

In parallel, efforts to establish peace in the Middle East are underway. The United States and Saudi Arabia are close to finalizing a significant security agreement, a Biden administration priority that could transform regional dynamics and facilitate the establishment of formal diplomatic relations between Israel and Saudi Arabia for the first time.

This agreement could also influence operations in the Gaza Strip.

For it to become a binding treaty, approved with the necessary 67 votes in the US Senate, it is likely that Saudi Arabia will have to formalize diplomatic relations with Israel, which would require a resolution to the conflict in the region. If realized, this treaty would represent a significant achievement for the United States.

04:11 — And the biggest election in the world is still happening

A few weeks ago, I announced that the biggest election on the planet was about to begin, that of India. This electoral process is still ongoing and will continue until the beginning of June.

Holding an election with such a vast electorate (almost a billion registered voters out of a population of about 1.5 billion) is extraordinarily complex.

After ten years of ruling, Prime Minister Narendra Modi is widely expected to be re-elected for a third term.

Modi’s Bhartiya Janata Party anticipates an even bigger victory this time, driven by the accelerated growth of the Indian economy and the fulfillment of promises that resonate with populist and Hindu nationalist aspirations.

This year, for example, was marked by the inauguration of a controversial temple built on the site of an old mosque, a gesture with clear populist appeal considering that around 80% of Indians are Hindu.

Additionally, India has enjoyed geopolitical tailwinds in a context of growing rivalry between the United States and China. Large corporations such as Apple, Boeing and Micron have announced plans to open new stores and factories in India, seeking to diversify their operations beyond Chinese soil.

As we discussed earlier, it is estimated that by the end of this decade, India could overtake China as the main driver of global growth.