Dollar rises and the stock market falls with Brazil in the opposite direction of optimism about Ukraine

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The exchange, stock and interest markets in Brazil traced a pessimistic scenario for domestic business at the beginning of this Monday (14), which went against the hopeful mood that lowered oil prices and boosted European stock markets.

Expectations of progress in the talks between Russia and Ukraine were responsible for the consistent drop of 6.81% in the barrel of Brent oil, quoted at US$ 105.00 (R$ 516.53) at 1:02 pm.

In Brazil, however, the drop in the commodity sank the shares of Petrobras and other oil companies. To make matters worse for the basic materials sector, outbreaks of Covid-19 in China have crippled iron ore trading, helping to send Vale shares down.

With the two main companies on the Stock Exchange in the red, the Ibovespa dropped 1.20%, at 110,362 points. The dollar rose 0.62% to R$5.0860. And the blame for the rise in the exchange rate and the fall in the stock market is not just the commodities.

This week, the Fed (Federal Reserve, the American central bank) is expected to take its benchmark interest rate from zero, a move that could lead foreigners to withdraw dollars from risky investments in emerging countries and take them to the safety of Treasury bonds. from United States.

In New York, the markets were fluctuating due to a combination of expectations about trading in Ukraine and higher interest rates from the Fed. The Dow Jones and S&P 500 indexes rose 0.62% and 0.11%, respectively. Nasdaq, which lists companies most vulnerable to rising interest rates, fell 1.03% after a higher open.

In Europe, the London Stock Exchange advanced 0.63%. Paris and Frankfurt jumped 2.05% and 2.47%, in that order.

It is in the fluctuation in the value of oil, however, that the most complex explanation for the fact that the Brazilian financial market is going downhill at the beginning of the week lies. This has everything to do with the strong political influence over the oil sector in Brazil.

Specifically on this Monday, the reduction in the expectation of short-term gains from oil company shares was caused by the occasional devaluation of the raw material.

But, considering the rises in oil since the beginning of the war, the inflationary pressure generated by the soaring of the commodity is what has been raising fears about Brazil. At the heart of the issue is the concern of investors that the government may interfere in Petrobras’ pricing policy, thus harming the company’s results and the country’s financial health.

It is not just the possibility of government intervention in fuel prices that worries the market. Tax waivers to try to reduce the effects of the fuel mega-increase draw investors’ attention to fiscal risk.

This is what analysts call the risk that the government will not be able to meet the budget, either due to increased spending or reduced revenue. This threat has traditionally affected the market in election years, such as 2022.

Allowing prices to rise without countermeasures also creates difficulties in the daily lives of the population that go beyond inflation.

Since the announcement of the mega-increase in fuel prices, last Thursday (10), the short-term interest rate futures market has galloped. The DI rates for 2023, negotiated between banks and which serve as a reference for credit operations in general, jumped from 12.90% to 13.18% per year, until this Monday.

In Asia, stocks closed mixed. Tokyo rose 0.58%. Hong Kong melted 4.97%. In mainland China, the main index for the Shanghai and Shenzhen markets plunged 3.06%.

“China’s markets retreated with the new wave of Covid and the implementation of zero tolerance with new lockdown decree, including the technology center of Shenzhen,” analysts at Ativa Investimento said in a bulletin to investors this morning.

Shutdowns in economic activity in China undermine expectations about futures contracts for iron ore, as the country is the largest producer of global steel. The metallic commodities sector is one of the most important for the Brazilian stock exchange, especially due to Vale’s high weight on the Ibovespa.

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