The domestic financial market reacted with euphoria this Monday (3) to the better-than-expected performance of current President Jair Bolsonaro (PL) in the first round of elections this Sunday (2). Although the election was largely responsible for the good mood, local negotiations also reflected the recovery of stock markets abroad after a fall in the quarterly closing last Friday (30).
In the domestic exchange market, the spot commercial dollar closed down by 4.05%, at R$ 5.1760 on sale. This is the biggest drop for the US currency since the more than 5% drop recorded on June 8, 2018.
At the time, the American currency had been lowered by an intervention by the Central Bank in the exchange rate and had its most expressive fall since October 2008, according to the Reuters agency.
In addition to considering the possibility of re-election of the candidate whose economic agenda is perceived as more liberal, investors also believe that the tight result of the vote —Lula got 48.4% of the valid votes, against 43.2% for Bolsonaro—will lead the PT to present names for an eventual government more aligned with the market.
Investors also weighed the news that Congress will be more conservative from next year. Bolsonaro’s party won at least 23 deputies, reaching 99, and became the largest bench elected in the Chamber in the last 24 years.
“Uncertainties that the market had with the elections here in Brazil seem to have diminished”, observed economist specialist in foreign exchange Cristiane Quartaroli, from Banco Ourinvest.
Although the performance of the real has been much better in relation to other currencies, some currencies of emerging countries also showed strong gains against the dollar, such as the Chilean and Colombian pesos.
Ibovespa jumps 5.5% and has the highest rise since April 2020; Sabesp shoots
On the Brazilian Stock Exchange, the Ibovespa index jumped 5.54%, to 116,134 points, at the close of this Monday. It is the biggest increase since the 6.52% gain recorded on April 6, 2020, when the market was recovering from the tumble caused by the beginning of the pandemic.
“The result [do primeiro turno da eleição] is seen as positive, both for keeping Bolsonaro in the race, and for the tighter dispute that, in theory, forces Lula to wave to the center and get more support”, commented João Beck, economist and partner at the investment firm BRA.
Shares of government-owned companies, as well as bank and retail securities, soared. The preferred shares of state oil company Petrobras jumped 7.99% and also moved the largest volume of the day.
The main highlight, however, was the 16.94% increase in Sabesp, the São Paulo sanitation company. Bolsonaro had a strong vote in the state and his candidate, former Minister of Infrastructure Tarcísio de Freitas (Republicans), surpassed former mayor Fernando Haddad (PT). They will contest the second round.
CDS (Credit Default Swap) contracts, also called country risk as they are a kind of insurance against defaults by Brazilian institutions, registered a drop of 6.35%, the highest since the second half of 2020.
On the other hand, DI interest rates, a reference for the credit sector, had declines in all contracts for the coming years, although rates maturing in the short term (until 2024) have declined by less than 1%.
On Friday (30), market participants were already attributing the improvement in the domestic financial market to the increase in the chance of a second round between Lula and Bolsonaro, since the latest polls of voting intentions showed that it was not possible to nail the victory. PT in the first round.
Rumors about the alleged participation of former minister Henrique Meirelles in an eventual Lula government also influenced the upward movement on the stock exchange on Friday, which increased 2.20% in that trading session.
“The scenario of putting Meirelles to touch the economy seems something more plausible”, said Beck, from BRA.
At the lower end of the Ibovespa, only two stocks fell: education groups Yduqs and Cogna lost 1.59% and 0.34%, respectively. Market participants commented that the outlook for these papers is better in the event of Lula’s victory, due to PT’s history with student subsidy programs such as Pro-Uni.
Favorable winds from abroad also boosted the stock market’s high and the dollar’s fall on Monday.
In the New York market, investors started the quarter by going shopping in a scenario of stocks strongly devalued by the inflationary crisis and uncertainties about a potential recession.
The Dow Jones, S&P 500 and Nasdaq, the top three indicators for US stocks, were up 2.66%, 2.59% and 2.27%.
Reflecting investor enthusiasm following the first round in Brazil, the New York Stock Exchange-traded MSCI Brazil ETF (EWZ) is up 9.85% this session to post its biggest daily gain since March 2020. .
Reference oil prices also rose at the start of the quarter on the news that OPEC (cartel of producing countries) and allies led by Russia decided to make a major cut in production.
The group wants to tighten the supply of raw material to bolster prices, which fell about 23% in the third quarter, the biggest drop since the beginning of the Covid pandemic.
As a result, the barrel of Brent oil jumped 4% in the early hours of the day, reported The Wall Street Journal. In the late afternoon, however, the price was US$ 88.65 (R$ 465), with a slight gain of 0.78%.
Brazil outperforms global markets in Q1
Regardless of the result of the first round, the Stock Exchange showed a strong recovery in the third quarter of this year, with an increase of 11.66%. The number of the domestic stock market is much higher than those obtained by the most important global exchanges.
In the United States, the main stock indices closed the quarter with strong declines. The Dow Jones indicator plunged 6.66% in the period.
This index tracks the stocks of 30 of the largest companies on the New York Stock Exchange and its cumulative annual drop of nearly 21% is a symptom of investors’ fears that the Fed’s high interest rate monetary policy. will lead the country and the world to a strong economic slowdown.
A reference for the American Stock Exchange, the S&P 500 index fell 5.28% in the quarter. Nasdaq, which concentrates shares of technology companies with great growth potential, sank 4.11%.
“The American market had a sequence of losses not seen since the 2008 crisis. Persistent inflation, allied to a tough stance of high interest rates, to control inflation, have increased the risk of a recession”, said Antônio Sanches , analyst at Rico Investimentos.
“At the same time, European countries also face difficulties with inflation, together with the conflict between Russia and Ukraine, generating important impacts on their economy,” added Sanches.
Over the week, the situation in global markets was further aggravated by the strong sale of UK debt securities, which deepened the fall in the value of the pound sterling against the dollar.
The crisis was triggered by a tax cut plan announced by the British government, whose expected effect is to heat up the economy. The stimulus goes against the aggressive interest rate hike adopted by the British central bank to curb inflation.
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