Dollar retreats with relief over China, but PEC still worries

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The dollar fell against the real this Tuesday (29), following the international good mood amid signs from the Chinese government that it can make its Covid-zero policy more flexible, although domestic fiscal fears persisted after the Transition PEC was sent to the Senate with a four-year term and exception to the ceiling of up to R$ 198 billion.

At 9:09 am (Brasília time), the spot dollar retreated 0.96%, to R$ 5.3130 in the sale. On B3, the dollar futures contract for the first month fell 1.02%, at R$ 5.3125.

This Monday (28), the spot commercial dollar closed down 0.83%, quoted at R$5.3650 on sale. The real had the best performance against the dollar among the main currencies in this session, which, in general, presented an international appreciation of the American currency.

The Ibovespa index, reference for the Brazilian Stock Exchange, fell 0.17%, to 108,782 points.

Petrobras and Vale rose by 2.39% and 0.91% and, as a result, prevented a sharper fall in the main indicator of the domestic stock market.

On the negative side of the Ibovespa, the highlight is the sharp declines in the retail sector after Black Friday results, which were considered weak. Americanas, Via and Lojas Renner fell, in that order, 9.68%, 6.70% and 4.42%.

In the interest market, the DI rate (interbank deposits) for 2024 retreated to 14.28% per annum, after closing last week at 14.48%.

Analysts pointed out that the appreciation of the real and of some stocks on the stock exchange responded to a correction movement after successive declines in the face of fears that the Transition PEC would pass through Congress without changes, which would be seen as a blank check for the government elected exaggeratedly increased the country’s spending.

The currency and some shares of companies in Brazil may also have benefited from the expectation that the government of Chinese President Xi Jinping will continue to create economic stimuli to soften the effects of the confinement of residents and the interruption of economic activities in the country to control Covid infections. .

Protests in China negatively influenced the main global markets this Monday, but did not prevent a slight improvement in part of Brazil’s financial indicators.

All of Wall Street’s main indicators retreated. Dow Jones, S&P 500 and Nasdaq lost 1.45%, 1.54% and 1.58% respectively.

The demonstrations began over the weekend after a fire in Urumqi, capital of Xinjiang region, killed 10 people. According to protesters, the fire department was slow to act because of the restrictions.

The markets abroad were even more pressured after one of the members of the Fed (Federal Reserve, the US central bank) reinforced that the monetary authority will continue to raise its interest rate.

James Bullard, chairman of the St. Louis, said it is necessary to raise interest rates further to get inflation under control and bring it down towards the 2% target. “We have a long way to go,” said Bullard.

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