High Selic and weak economy interrupt gains on the Stock Exchange

Signs that the Central Bank will continue to aggressively increase the basic interest rate (Selic), even with the country’s economy stopping to grow, indicated to the market this Thursday (9) that companies listed on the Brazilian Stock Exchange will face a lean season.

The Ibovespa, the Stock Exchange’s reference index, closed this Thursday down 1.67%, at 106,291 points. The session ended in red interrupted a sequence of five highs in a row, which were mainly motivated by the reduction of fear of the omicron variant of the coronavirus.

In the foreign exchange market, the dollar gained momentum due to a global risk aversion movement in light of expectations of rising inflation in the United States. The American currency closed the day up 0.72%, at R$ 5.5750.

In Brazil, after the Copom (Central Bank’s Monetary Policy Committee) raised the Selic by 1.5 percentage points this Wednesday (8), investors started to assess the message from the monetary authority on the need to move forward with the monetary tightening to curb the advance of inflation.

The market already counted on an increase from 7.75% to 9.25% of the Selic, which was confirmed, but received with concern the indication of the continuation of the rise in interest rates.

“The central bank’s speech had a hawkish tone [que sugere elevação maior e mais rápida da taxa de juros, no jargão do setor], which heated up discussions in the market about the probability of a new increase of 1.5 percentage points at the next meeting,” wrote analysts from the research team at Ativa Investimentos.

In the statement released on Wednesday, the Copom stated that “it is opportune to significantly advance the process of monetary tightening in the restrictive territory”. The addition of the word “significant” in relation to the previous statement was one of the points responsible for turning on the warning signal for investors, according to Rafael Ribeiro, an analyst at Clear Corretora.

“We have an expectation of high Selic and weak growth over the next year, a combo that harms the potential for appreciation of domestic companies, a fact that explains yet another trading session of strong decline in the retail sector,” said Ribeiro.

Among the main stock market declines on this Thursday were Lojas Americanas (-9.24%), Americanas (-8.56%) and Magazine Luiza (-7.78%).

In light of signs of continued monetary tightening, the interest rate on DI contracts (Interbank Deposits) maturing in January 2023 rose 0.24 percentage points, to 11.61% per year.

Negotiated among financial institutions, the DI rate for the beginning of 2023 reveals what the market expects about the course of interest rates in the country over the next year.

Abroad, concerns about escalating inflation also dictated the behavior of global stock markets.

The release of the consumer price report this Friday (10) may influence the monetary policy decision of the Federal Reserve (Fed, the central bank of the United States) on the need to anticipate the increase in the country’s interest rate.

Higher-than-expected inflation may lead the monetary authority to accelerate the reduction in asset purchases carried out by the government to stimulate the economy during the crisis generated by Covid-19.

The two measures take liquidity out of stock exchanges and have an important negative impact on investors’ decision to invest in emerging markets such as Brazil.

Composed of technology companies whose stock market performance tends to deteriorate in a scenario of high interest rates, the Nasdaq index closed sharply down 1.71%. The S&P 500, the benchmark of the American stock market, gave 0.72%. The Dow Jones closed stable.

Oil closed with a sharp drop of 2.53%, with a barrel quoted at US$ 73.90 (R$ 410.57). Petrobras preferred shares retreated 0.20%.

Nubank shares soar to debut on New York Stock Exchange

In its debut on the New York Stock Exchange (NYSE), in the United States, the shares of Nubank ended with a strong appreciation of 14.78%, quoted at US$ 10.33 (R$ 57.39).

At B3, in which certificates corresponding to shares traded on the NYSE were simultaneously listed, Nubank’s BDRs rose 20.1% this Thursday, to R$ 10.04.

As a result, the digital bank is positioned as the third largest Brazilian company with shares listed on the Stock Exchange in terms of market value. The company ended the day with a market value of US$47.6 billion (R$264.45 billion).

Nubank is second only to Petrobras (US$ 70.7 billion, R$ 392.7 billion) and Vale (US$ 69.3 billion, R$ 385 billion).