Stock drops and is close to losing the end of the year rally

The Ibovespa closed down 0.65% this Tuesday (28), at 104,864 points. With this result in the penultimate session of 2021, the domestic stock market accumulates a negative weekly balance of 0.02% and reveals investors discouraged from making a year-end rush in search of opportunities on the Brazilian Stock Exchange. High interest rates, fiscal risk and unemployment explain the lack of appetite.

Bordering stability throughout the session, the dollar closed up 0.05% at R$5.6410.

Little attended, the last week of the year on the stock exchanges tends to be marked by the optimism of negotiators who have not yet gone out to take advantage of the New Year’s holiday.

In Brazil, however, where the Stock Exchange accumulates an annual drop of 11.89%, the willingness to take risks in this final stretch is lower, according to Alexsandro Nishimura, economist and partner at BRA.

“Unlike its international peers, Ibovespa did not take advantage of the ‘year-end rally’, it took the opposite direction and accentuated losses,” said Nishimura.

In the United States, the Dow Jones industrial index rose 0.26%, while the S&P 500 benchmark edged slightly (-0.10%), after having reached a record score the day before.

Nasdaq, which concentrates small and medium-sized companies in the technology sector —many linked to retail trade—, dropped 0.56%.

This market tends to be the most impacted by measures to restrict the movement of people adopted around the world to reduce the record curve of infected by Covid-19 while the omicron variant gains ground. Despite this, it had also come close to its highest historical score in this second (27).

The main markets in Europe also closed higher, except for the London Stock Exchange, which had a slight decrease of 0.02%. The UK faces a new wave of Covid.

While worrisome, investor fears of Covid have waned as studies show that omicron may be less lethal than other variants.

Concerns about the future of commodity markets with a large share of local companies weighed more heavily on the Brazilian market in this session, says Rafael Ribeiro, an analyst at Clear Corretora.

Ribeiro says the Ibovespa is struggling to stay in the 105,000-point range amid the fall in iron ore futures traded on the stock exchange in the Chinese port of Dalian, which gave way for the second consecutive trading session after disappointing data on the country’s steel production .

“Crude steel production in mid-December fell by 2.3%, compared to the first ten days of the month, which creates uncertainty about demand at the beginning of next year, even more so with the environmental restrictions caused by the Olympics in Winter,” he commented.

With the largest share in the result of this Tuesday’s trading session, Vale retreated 2.72%. The company is directly affected by the devaluation of ore in its main market.

Highlighting the slight rise in the exchange rate on Tuesday, Zeller Bernardino, a specialist at Valor Investimentos, stresses that the local market still operates with fiscal risk on the radar.

For Bernardino, unemployment data released this Tuesday ended up influencing the market on a day of low liquidity.

The unemployment rate in Brazil retreated to 12.1% in the quarter ended in October 2021. The number was slightly below the 12.3% estimated by the survey by the Bloomberg agency.

Even with the fall, the country still registered 12.9 million unemployed in the period.

“The market is expected to remain weak for some time, especially when taking into account the expectation of significantly below trend growth in 2022,” commented analysts at Goldman Sachs in a statement.

“The unemployment rate will likely remain in the double digits for a long period of time, as the number of despondent workers is still considerable,” the note says.

Banco Original’s report highlighted tensions over the Union’s payroll in 2022, considering news about the handing over of positions of tax auditors in protest for salary readjustments, while President Jair Bolsonaro guaranteed increases to federal police officers.

In addition, the bank pointed out concerns about the increase in interest rates for consumers. The average rate charged by banks in November was the highest recorded in two years, following the Central Bank’s monetary tightening to curb inflation.

Brent oil, a benchmark for the market, rose 0.48% to US$ 78.98 (R$ 445.69). This helped Petrobras to advance 0.10%.

Still rocked by positive data on sales at Christmas, shares in the retail sector and tourism led the rises on the Stock Exchange. Ciello (4.13%), CVC (3.13%), BR Malls (2.78%) and Iguatemi (2.78%) pulled the high queue. The front platoon also had the participation of the education sector company Yduqs, which rose 3.94%.