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Red Thursday at the Market

Thursday (9) was a day of high tension in the Brazilian financial market, which dawned digesting higher-than-expected inflation and reacted very badly to criticism by President-elect Lula (PT) of rules that limit public spending.

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Meanwhile, in the US stock indices had their best day since 2020 in reaction to lower-than-expected inflation (see below). The S&P500 rose 5.54%while Nasdaq soared 7.35%🇧🇷

In numbers: the dollar soared 4.08% and closed the BRL 5.39🇧🇷 It was the biggest daily rise of the American currency against the real since March 16, 2020, at the beginning of the pandemic.

  • Ibovespa tumbled 3.35%to the 109,775 pointsin the sharpest fall of the year.
  • Future interest rates, another parameter for capturing market stress, soared. The rates on DI contracts (interbank deposits) maturing in 2024 jumped from 13.05% for 13.63% per year.
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What explains: the higher-than-expected IPCA (see below) was negative because it may mean that interest rates will take longer to fall. The trigger for the bleeding in assets, however, were Lula’s statements.

  • “Why are people made to suffer in order to guarantee such fiscal stability in this country? Why do people all the time say that spending must be cut, that it is necessary to have a surplus, that it is necessary to have a spending ceiling?”, said the president. elected to parliamentarians from allied parties.

Why did the lines get so bad? In addition to signaling a lack of commitment to public accounts, they took place at a time of great uncertainty about what the next government’s economic agenda will look like.

  • The market is still waiting, however, for the definition of the Minister of Finance, for a plan to control the increase in debt and for the size of the expenses that will be placed in the Transition PEC – which still has an indefinite design.
  • Lula mocked the reaction. “The market gets nervous for nothing. I’ve never seen the market as sensitive as ours. It’s funny that this market hasn’t been nervous in four years of [Jair] Bolsonaro (PL),” he said.

The repercussion of Lula’s speeches and the reaction of the market:

Opposite reactions to inflation in Brazil and the US

Consumer inflation indices in Brazil and the US for October were released on Thursday and generated mixed feelings among investors.

In Brazilthe IPCA rose 0.59% last month, the first high after three months of deflation. The advance came above market projections, whose median was 0.49%🇧🇷 In 12 months, the indicator accumulated a high of 6.47%🇧🇷

  • Of the 9 groups of products and services, 8 had progress in October. Highlight for the food and beverage group, which rose 0.72% and had the greatest impact on the index (0.16 point).
  • The segment was driven by food at home (0.80%). Highlight for the highs of English potato (23.36%), tomato (17.63%), onion (9.31%) and fruits (3.56%🇧🇷

In the USA, the consumer index decelerated more than the market expected. The high accumulated in 12 months until October reached 7.7%, and the median of the analysts predicted an advance of 7.9%🇧🇷

  • Core inflation, which excludes volatile items such as energy and food, also dropped more than the projection.
  • The reflex was a general increase in risk assets in the US. For experts, the result of inflation may lead the Fed to reduce the rate hike from 0.75 point to 0.5 point at the next meeting.

take a break

  • To watch “The Art of Saving” – on Netflix

Having trouble getting your bills up to date? Did you ask for a loan and it snowballed hard to get over? At a time when the Selic rate is 13.75% per year and the Brazilian population is experiencing record defaults, these situations are not uncommon.

  • A documentary recently released on Netflix shows four personal finance consultants teaching people with different budgets to be disciplined with their accounts.
  • Despite being a US production, many of the advices are universal and adaptable to the Brazilian reality, such as cutting superfluous expenses and advising on investing the money left over to obtain a yield above inflation.

Options: there is no lack of free content in Portuguese on the subject. The influencers Nathalia Arcuri, from the Me Poupe! channel, and Nathália Rodrigues, from Nath Finanças, are some of the examples.

In addition to the economy:

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