The fear that a new variant of the coronavirus could be resistant to vaccines, which would require containment measures that will affect the economy, shook financial markets around the world on Friday (26), causing the flight of assets considered more risky. Exchanges, foreign exchange, cryptocurrencies, future interest rates and commodity prices, especially oil, were affected.
The Ibovespa, the benchmark for the Brazilian Stock Exchange, dropped 3.39% to 102,224 points. The commercial dollar closed up 0.53% at R$5.5950. At the maximum of the day, the currency jumped to R$ 5.6730.
The most important commodities for the Brazilian market were also impacted, with emphasis on the sharp drop in oil. Brent barrel sank 11.55%, at US$72.72 (R$406.20), the lowest price since September 9, when the commodity closed at US$71.45.
Directly affected by the variation of oil in the international market, Petrobras’ preferred shares fell 3.88%. The shares of the state-owned company led negotiations in the trading session this Friday.
Iron ore futures contracts for January 2022 tumbled 4.87%, following a string of highs driven by hopes of an acceleration of economic activity in China. Vale’s shares retreated 2.64%.
In the United States, the Dow Jones, S&P 500 and Nasdaq indices fell 2.53%, 2.27% and 2.23%, respectively.
The cryptocurrency market also registered heavy losses. The daily quotation of bitcoin gave 8.36%, to US$ 54,259.93 (R$ 303,090.54). The ethereum fell 9.86%, to US$ 4,076.30 (R$ 22,769.80).
Brazil would be particularly harmed by new measures to restrict movement to contain a new wave of Covid-19, according to Rafael Ribeiro, an analyst at Clear Corretora. “A new stoppage would drastically reduce the growth prospects for the coming years, which is no longer a big deal,” he says.
João Leal, an economist at Rio Bravo, points out that Brazil has developed mechanisms throughout the pandemic to “avoid a more intense economic downturn” and that these measures still exist.
The government would need, however, to spend more at a time when the risk of fiscal imbalance is already bringing down investments in companies in the country. “There would be a new need for fiscal and monetary incentives”, says Leal.
Future interest rates closed the session with a sharp drop, prevailing the perception that the risk of a global slowdown brought by the new strain may reduce the need for such an aggressive increase in interest rates as had been foreseen.
Contracts for January 2023 retreated to 11.90%, compared to 12.05% at the close of the day before, while those that expire in January 2027 went from 11.81% to 11.71%.
“Slower growth demands a slower pace of tightening monetary policy by central banks,” says Paulo Nepomuceno, fixed income operator at Terra Investimentos.
In Asia, the Tokyo stock market fell 2.53%. The Hong Kong Stock Exchange dropped 2.67%. The CSI300 index (Shanghai and Shenzhen) retreated 0.74%.
The European stock market closed sharply down. The Stoxx 50 index, which brings together large companies in the region, dropped 4.74%, and registered the lowest price since October 13th.
The London, Paris and Frankfurt stock exchanges dropped 3.64%, 4.75% and 4.15%.
The United Kingdom announced a temporary ban on flights from South Africa and several neighboring countries. The European Union plans a similar move.
The European stock market was already under stress this week as the resurgence of Covid-19 cases led to new restrictions in several countries.
Little is known about the variant, detected in South Africa, Botswana and Hong Kong, but scientists say it has an unusual combination of mutations that may be able to evade immune responses and would be more transmissible.
“The panic imposes caution among investors, who, fearful of the advance of the new variant of the virus around the world, move away from risk and take refuge in assets that represent security”, wrote Ricardo Gomes da Silva, superintendent of Correparti Corretora.
Air, travel and retail lead losses in the Brazilian market
Few companies escaped the general fall in the country’s stock market, but the impact was greater on companies most vulnerable to possible measures to restrict circulation, especially in the transport, aviation, tourism and retail sectors.
Activities linked to the financial sector and the production of oil, steel and mining also appeared in the list of main losses.
The Azul and Gol airlines sank 14.18% and 11.81%, respectively. Travel company CVC plummeted by 11.06%. Complete the list of the ten biggest falls Meliuz (-10.42%), PetroRio (-8.74%), Embraer (-8.41), Magazine Luiza (-7.36%), Banco Pan (-6.75 %), Usiminas (-6.58%) and Americanas (-6.22%).
The fall of 3.39% on the Brazilian stock exchange was less than expected, according to Jansen Costa, founding partner of Factorial Investimentos.
This may indicate that the deterioration of the domestic market that was already underway – the Ibovespa has fallen 14% this year – has left little scope for investors to take profits in this time of stress, according to the analyst.
“The market had difficulty falling more than it had already been falling, that is, I believe it is close to the bottom,” commented Costa.
Tourism-related stocks collapse and pharmaceuticals soar in the US
Among the companies listed on the S&P 500, a reference in the American stock market, tourism and air transport companies led the falls.
Cruise liners Royal Caribbean, Norwegian Cruise and Carnival lost 13.22%, 11.36% and 10.96%, respectively. The airlines United, American and Delta dropped 9.57%, 8.79% and 8.34%.
Pharmaceutical companies that are among the main developers of vaccines and drugs against Covi-19 were the most valued. Moderna soared 20.57% and Pfizer rose 6.11%.
China Markets Close Lower
China shares closed lower on Friday, reflecting concerns about the new variant and Covid’s domestic cases.
The CSI300 index, which brings together the largest companies listed in Shanghai and Shenzhen, fell by 0.74%, while the Shanghai index fell by 0.56%.
For the week, the CSI300 lost 0.6%, but the Shanghai index gained 0.1%.
A series of local Covid-19 cases in some parts of China has led the city of Shanghai to limit tourist activities and a nearby city to cut public transport services.
This brought down tourism and consumer staples stocks by 1.8% and 0.8%, respectively.
Semiconductor and energy stocks led the losses. The real estate, energy and semiconductor sub-indices fell between 1.2% and 2.8%.
with Reuters
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