Stocks fall amid China intervention on ore, Ukraine crisis and US inflation

International pressure on the main basic materials produced by Brazil pushed down in the early afternoon of this Thursday (17) the shares of the most important companies for the country’s Stock Exchange. The scenario became even more unfavorable for business amid the falls in the main global markets, a situation enhanced by the pessimism of investors regarding tensions involving Russia and Ukraine and also about inflation in the United States.

At 12:45, the Ibovespa dropped 1.15%, to 113,849 points. In this way, the stock exchange’s reference index was on its way to interrupting a cycle of seven consecutive daily highs. The dollar rose 0.79% to R$5.17. The American currency, however, remains close to the lowest prices since the beginning of the second half of last year.

The main source of the fall in the Brazilian stock market is in the commodities sector, as Pietra Guerra, an equity specialist at Clear Corretora, described in his bulletin to investors on Thursday.

After weeks of appreciation at the beginning of 2022, iron ore contract prices have dropped rapidly in recent days. China, the main consumer of this raw material, decided to tighten control over values.

“The Chinese government is investigating irregular operations to avoid artificial price adjustments and somehow wants to limit gains from speculation,” commented the Clear analyst.

Guerra highlights that the shares of companies in the mining and steel sector, which represent more than 20% of the Ibovespa’s trading volume, tend to respond to the price of ore. Vale was down more than 3%.

After having surpassed 115,000 points the day before, the Brazilian stock exchange would naturally face a technical difficulty to continue on the rise this Thursday, as recent gains generate pressure to sell. Investors tend to seek the realization of profits made recently, as explained Nicolas Borsoi, chief economist at Nova Futura.

Abroad, the continued movement of Russian troops on the Ukrainian border heightened tensions about a potential armed conflict in Europe. Russia is a major producer of oil and gas and a worsening crisis could damage supply and further accelerate global inflation. “It is a challenging combination for the Ibovespa”, stated Borsoi.

Despite being around the highest prices in seven years, the barrel of Brent oil dropped 2.35%, to US$ 92.58 (R$ 477.93). Analysts attribute the drop to the possibility that Iran will once again be accepted by Western powers as a supplier of the commodity due to progress in negotiations over the country’s nuclear program.

For Brazil, the drop in oil is reflected in the devaluation of Petrobras shares, which fell by more than 1%.

In the American market, investors started the day reacting to the crisis involving Ukraine and evaluating the minutes of the Fed’s (Federal Reserve, the central bank of the United States) meeting in January on the next steps of the monetary tightening to control the highest inflation in 40 years old.

The Dow Jones, S&P 500 and Nasdaq indexes were down 1.33%, 1.38% and 1.64%, in that order.

The Fed’s minutes showed that advisers agreed that, with inflation increasing its impact on the economy and a buoyant job market, it was time to raise interest rates and reduce asset purchases in the financial market.

They said, however, that decisions be made according to the scenario at the time of each group meeting. The January meeting was the first of eight scheduled for this year.

Although the US market is still in the process of releasing corporate earnings for the fourth quarter of 2021, investors’ attention is completely focused on the crisis in Europe and the rise in interest rates, the global head of equities at Federated Hermes told Bloomberg, Geir Lode. “The fluctuation of the markets is still driven by these two themes: inflation and Russia”, he commented.