Stock drops 0.72% and dollar rises to R$ 5.69 with inflation on the radar

The Brazilian Stock Exchange retreated this Wednesday (29) for the second day in a row. Inflation and high interest rates are back on the radar of investors, who are also concerned about the advance of contamination by Covid-19.

In the penultimate trading session of the year, the Ibovespa index dropped 0.72% to 104,107 points. The dollar rose 0.93%, to R$ 5.6940. In addition to reflecting internal risks, the American currency is usually in greater demand at this time due to accounting adjustments made by companies.

The IGP-M (General Price Index – Market), known as the rent inflation indicator in Brazil, accumulated an increase of 17.78% in the 12 months of 2021. The result came in above expectations.

Analysts consulted by Bloomberg agency pointed to a smaller advance, of 17.62%.

Rafael Ribeiro, an analyst at Clear Corretora, points out that the above-expected result of yet another inflation indicator was directly reflected in the rise in the interest rate curve, which explains the second consecutive drop in the Brazilian market, even on a day with few negotiations. “The very short-term downtrend prevails,” he said.

The interest on DI contracts (Interbank Deposits) for January 2023 rose 0.15 percentage points, to 11.82% per year. Negotiated between banks, these contracts are the main reference for financing interest rates over the next year.

They also signal investors’ expectations about the Central Bank’s next steps in fighting inflation.

The rise in the interest rate curve indicates that the market expects the monetary authority to continue raising the Selic rate to curb the rise in prices, making companies’ operating costs more expensive and hurting the stock market.

Recomposing portfolios with a focus on 2022, multimarket funds are reducing their positions in risky assets and betting on investments linked to interest and exchange rates, contributing to the stock market’s fall this week, according to Flávio de Oliveira, variable income manager at Zahl.

Brent crude rose 0.33% to US$79.20 (R$448.37). Despite the high in the commodity, Petrobras preferred shares retreated 0.83%.

Vale shares rose 0.59% on a day of recovery in iron ore futures contracts.

Companies linked to tourism and air transport led the losses on the Brazilian stock exchange. Azul, CVC and Gol dropped 7.34%, 7.33% and 6.72%, respectively. The advancement of the omicron variant is a stumbling block in the path of recovery in these sectors.

In the United States, the Dow Jones index rose 0.25%, while the S&P 500 rose 0.14%. Both achieved record scores. Nasdaq gave 0.10%.

This Wednesday, B3, the Brazilian Stock Exchange, released the third and final preview of the Ibovespa index, which will run from January 3, 2022 to April 29, 2022.

Positivo Tec ON (POSI3), CSN Mineração ON (CMIN3) and 3R Petroleum ON (RRRP3) entered the portfolio, totaling 93 assets from 90 companies. GetNet UNT (GETT11) and Banco Inter PN (BIDI4) came out.

Ibovespa is the main performance indicator of the shares traded. It is made up of shares listed on B3 that correspond to approximately 80% of the number of trades and the financial volume of the domestic capital market.

Every four months, the shares included in the index are re-evaluated and, eventually, replaced according to the criteria established for the composition of the portfolio.