The main world stock exchanges retreated this Monday (10th) amid investor expectations about rising interest rates in the United States. Bursts of Covid cases with the spread of the omicron variant also threaten to exacerbate the supply crisis, which is responsible for the global inflation that is driving monetary tightening.
The Ibovespa, the Brazilian stock exchange’s reference index, dropped 0.75%, to 101,945 points. The dollar closed up 0.74%, at R$ 5.6740.
The domestic market mirrored the losses of Wall Street, where the main indices have sunk since last week, when the minutes of the last Fed meeting (Federal Reserve, the American central bank) revealed that the rise in interest rates in the country could be faster than what analysts were waiting for.
Higher interest rates in the United States improve the return on investments in US Treasury bonds, reducing investor interest in the stock exchanges.
This is not the only detrimental effect on companies present in the stock markets. Companies still in formation of cash, more dependent on financing, have their costs increased with the increase in interest rates.
It is the problem faced by technology companies listed on Nasdaq, which despite having closed up 0.05% on Monday, has already fallen 4.35% since the release of the Fed’s minutes on January 5.
In this session, the Nasdaq index fell close to 2.7% as the country’s benchmark rates approached their highest level in two years.
“The movement of interest rates in the world’s largest economy has a direct impact on our market. When American interest rates start to pay higher returns, the flow of foreign capital to emerging markets decreases”, comments Paula Zogbi, investment analyst at Rico.
“On the stock exchanges, the assets most affected are those of companies that are growing and with much of their revenue projected into the future, such as the technology sector, as the cost of financing rises.”
Affected by the pessimism of investors on the New York Stock Exchange, the S&P 500 and Dow Jones indexes dropped 0.14% and 0.45%, respectively.
JP Morgan Chief Executive Jamie Dimon said on Monday the economy is generating so much inflation that the US central bank may have to raise short-term interest rates more than four times this year.
“It’s possible that inflation is worse than people think. I personally would be surprised if there were only four increases [de juros] in this year. Four would be too easy for the economy to absorb,” he said.
Dimon also warned that financial market volatility will increase as the central bank raises interest rates. “If we’re lucky, the Fed will go slower, and we’ll have a soft landing,” he said.
In Europe, the main stock markets closed lower. London, Paris and Frankfurt fell 0.53%, 1.44% and 1.13%, in that order.
As in the United States, European monetary authorities are discussing monetary tightening to curb inflation.
Extraordinary advances in Covid cases around the world add a new layer of concerns about inflation.
Despite causing fewer hospitalizations, the mass removals generated by the disease raise fears that the resumption of the rhythm of production and distribution of goods could be momentarily harmed, as explained by Daniel Miraglia, chief economist at Integral Group.
“In the short term, there is pressure of supply shock, mainly of manpower”, he says. “This should last until March.”
Analysts point to the current global inflation as a result of shortages generated by the disorganization of supply chains during periods of severe circulation restrictions generated by the pandemic.
In Brazil, the Central Bank’s weekly survey with financial sector analysts showed that the expectation of the basic interest rate (Selic) for this year rose from 11.50% to 11.75%.
Since the turn of the year, the rate on DI contracts (Interbank Deposits) for January 2024 has risen 0.84 percentage points, from 10.97% to 11.81% per year. Negotiated between banks, this rate serves as a reference for financing contracts.
“The Brazilian yield curve is following the rise of the American yield curves”, says Jansen Costa, founding partner of Fatorial Investimentos.
The main companies on the Brazilian stock exchange also weighed in on the Ibovespa’s fall this Monday.
With its production partially hampered by the rains in Minas Gerais, Vale fell 1.19%.
Petrobras yielded 0.60%, reflecting the 1% drop in oil. The barrel of Brent closed at US$ 80.93 (R$ 459.11).
with Reuters
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