Stock market falls 1.18% and dollar closes stable on Selic high day

The Brazilian Stock Exchange interrupted this Wednesday (2) the upward trajectory of the last few days. The Ibovespa dropped 1.18%, to 111,894 points. The dollar rose 0.03%, to R$ 5.2760, that is, it was practically stable.

The fall in the stock market benchmark occurred amid investor expectations regarding the conclusion of the Central Bank’s Copom (Monetary Policy Committee) meeting on the increase in the Selic rate.

As soon as the market closed, the monetary authority announced the third consecutive increase of 1.5 percentage points in the country’s basic interest, raising the rate to 10.75% per year.

By raising the cost of credit in the country, the Copom reinforces the fight against inflation by withdrawing money from circulation in the economy.

Higher interest rates also increase the attractiveness of Brazilian fixed income for foreign investors, which reduces the risk of a capital flight towards US Treasury bonds, where the Fed (Federal Reserve, the US central bank) is preparing to start to raise its interest rate.

This maneuver, therefore, also aims to avoid a shortage of dollars in Brazil. This tends to prevent exaggerated increases in the US currency, one of the factors responsible for pushing up inflation.

Despite this Wednesday’s result, the Ibovespa accumulates highs in 2022. Some market participants attribute this situation to adjustments in the bets for interest rate hikes in the United States, amid doubts about how far the Federal Reserve will go in its attempt to tame inflation. .

At the moment, the prevailing view is that the US central bank will raise borrowing costs by 0.25 percentage point up to five times this year, starting in March.

This is generally seen as positive for the dollar, as higher interest rates would increase the attractiveness of investing in US sovereign bonds.

André Digiacomo, interest rate and currency strategist for Latin America at BNP Paribas, said, however, that he sees factors in Brazil that could protect the real from the impact of any monetary tightening in the world’s largest economy.

“In addition to the high Selic, we have other cushions: a current account at more sustainable levels, better terms of trade and high commodity prices,” said the BNP strategist.

The rise in oil prices is one of the important components of global inflation and, consequently, the rise in interest rates in the main economies. A barrel of Brent was up 0.39% at USD 89.51 (R$ 472.64) later this afternoon.

The Organization of Petroleum Exporting Countries and allies led by Russia, a group known as OPEC+ and which produces more than 40% of global oil supply, maintained its target of monthly increases of 400,000 barrels a day and justified the increase in oil prices. oil by the failure of consuming nations to secure adequate investments in fossil fuels as they shift to greener energies.

Commodity prices are also pressured by tensions between Russia and the US. Washington accuses Moscow of planning to invade Ukraine, which Russia denies.

In the United States, the Dow Jones, S&P 500 and Nasdaq index advanced 0.63%, 0.94% and 0.50% respectively.

After having closed January with the worst monthly result since the beginning of the pandemic due to the apprehension of investors with the rise in interest rates, the American stock market shows signs of recovery.

Analysts attribute the recovery to positive fourth-quarter 2021 earnings for most of the 500 large companies that make up the S&P 500, the New York Stock Exchange’s benchmark.

This good moment does not mean the end of volatility in the stock markets, according to Luc Filip, head of investment at SYZ Private Banking.

“The focus has clearly turned to earnings. We’ve seen strong results from big tech companies. But at some point, we may have sentiment reverting back to macro data and the Fed. We think we’re going to swing between those two points,” Filip said. The Wall Street Journal.

with Reuters