Stocks soar as Russian troops surround Ukraine’s capital

Stocks in the main global economies soared this Friday (25), especially in Europe. The package of relatively lenient sanctions on Russia announced the day before by US President Joe Biden, as well as the takeover of the Ukrainian capital Kiev by Russian troops, led investors to believe in a quick end to the crisis and without devastating economic consequences.

Brazil’s financial market has also largely reversed the heaviest effects of investors’ risk aversion in recent days. After a lower opening, the Stock Exchange closed with a gain of 1.39%, at 113,998 points. The dollar, however, ended the day with significant appreciation against the real. The American currency rose 0.99% to R$5.1550.

The recovery of emerging markets, such as Brazil, tends to be more difficult because they are considered more risky in times of uncertainty, even if there are fundamentals that indicate possibilities of high gains, according to Fernanda Mansano, chief economist at investor platform TC .

In a basket of 24 emerging currencies, the real offered the worst spot return against the dollar, considering the two daily closes since the beginning of the war. The Brazilian currency was also the only one with an important negative result in this range (-0.66%). The Russian ruble appreciated the most, at 2.82%. In this two-day period, the real and the ruble occupy opposite positions in relation to their positions in the ranking of accumulated returns since the beginning of the year.

“Emerging currencies got worse on the first day of the war, but today they returned these losses, minus the real. Investors are more defensive in relation to Brazil due to the extended holiday that we will have ahead. As there will be no trading in the next few days and the situation is unpredictable, they are defending themselves,” said Cristiane Quartaroli, economist at Banco Ourinvest.

Due to Carnival, B3, the Brazilian Stock Exchange, will only resume trading on the afternoon of next Wednesday (2).

In New York, the benchmark S&P 500 index rose 2.24%, mainly driven by the gains of large companies accompanied by the Dow Jones indicator, which advanced 2.51%. The Nasdaq technology exchange appreciated by 1.64%.

After sharp declines on Thursday (24), European stock markets soared on Friday. London, Paris and Frankfurt closed with gains of 3.91%, 3.55% and 3.67%, respectively. The Moscow Stock Exchange jumped 20.04%, after a historic drop of more than 30% the day before.

In Asia, most markets closed in the dark, with a highlight on the 1.95% gain of the Tokyo Stock Exchange.

The positive turn of the markets had started the day before, when US stocks came out of the red after the announcement of sanctions on Russia.

Biden blocked business from Russia’s largest companies in US banks, but allowed them to continue business activities related to the energy sector, such as fuel exploration and production, and food.

The fuel shortage that could be caused by limitations in this segment would result in an even greater acceleration of global inflation, forcing the Fed (Federal Reserve, the American central bank) to raise American interest rates above what the market expected. US stocks face corrections this year on the expectation of a monetary tightening.

In the international oil market, the barrel of Brent dropped 0.70%, at US$ 98.39 (R$ 505.60), at the beginning of the night.

“The absence of sanctions on Russian oil companies and Biden’s pledge not to send troops have eased tensions,” said Nicolas Borsoi, chief economist at Nova Futura.

Another point evaluated as positive by the market was the signal from the Kremlin, after surrounding the Ukrainian capital, that it is willing to negotiate. According to spokesman Dmitri Peskov, Russian President Vladimir Putin agrees to send a delegation to Minsk (Belarus) to discuss “Ukraine’s neutrality”.

Several items in the basic materials segment reflected some reduction in pressure. Wheat futures contracts, whose Russian production is one of the most relevant, fell by around 8%, after having accumulated gains of 16.26% in the last three days.

At the end of the day, the Bloomberg index that follows the commodities market fell 2.57%, after four daily highs.

Among the most relevant inputs for global trade and, in particular for Brazil, iron ore did not follow the decline in commodities. Instead, it was up 1.09%, based on Bloomberg’s futures index.

Russia and Ukraine are important producers of ore pellets, a variation of the raw material used in steel production.

Brazilian mining company Vale, one of the main global iron ore producers, soared as the company with the highest positive weight on the Ibovespa this Friday. The company’s shares rose 5.41% at the end of the trading session.

In addition to the expectation of appreciation of the ore with the crisis in Ukraine, the company had announced the day before the biggest profit in the history of Brazil, of R$ 121 billion.

Still in the steel and metallurgy sector, CSN and Gerdau jumped 6.81% and 4.86%, respectively. Completing the list of positive highlights on the Stock Exchange were the private oil companies 3R Petroleum (5.64%) and PetroRio (3.86%). State-owned Petrobras rose 1.83%.

Analysts warn, however, that the momentary easing observed this Friday does not represent the end of volatility in the markets amid a conflict with unpredictable results.

“I don’t think this highly volatile period is over yet,” said Daniel Egger, chief investment officer at St.Gotthard Fund Management. “Right now, we have to focus on what’s happening in Kiev,” he said in an interview with The Wall Street Journal. “And I would definitely say that sanctions on Russia can still be stepped up.”