Oil soars in pessimism over Ukraine war

Difficulties in progress in negotiations for a ceasefire between Russia and Ukraine are beginning to smother the optimism of recent days, which had been collaborating mainly with the drop in oil on the international market.

This Thursday (17), the price of the raw material rose again after five drops in six days. At 1:20 pm, the barrel of Brent oil jumped 8.92%, to US$ 106.76 (R$ 547.47). The commodity regains value due to investor expectations of a post-pandemic economic recovery horizon in which the prolonged reduction in Russian supply could result in shortages.

The war in Ukraine has entered its fourth week and, despite announcements of progress in negotiations, Russian bombing continues to punish civilian areas of major Ukrainian cities.

“It shows that we are not at the end of this conflict, that the commodity price situation is not going to improve, which makes sentiment difficult,” Esty Dwek, chief investment officer at FlowBank, told The Wall Street Journal.

The European market also showed dismay with negotiations to end the war on the continent. Paris and Frankfurt stock exchanges fell 0.31% and 1.05%, in that order. London rose 0.66%.

In Brazil, the Stock Exchange rose 0.93%, to 112,146 points. The dollar retreated 0.90%, to R$ 5.0460. Foreign investors tend to seek profits in the Brazilian commodities sector, the most important on the Ibovespa. This movement of dollars entering the stock exchange is important for the relief in the exchange rate.

One day after the Central Bank announced a 1 percentage point hike in the Selic rate, now at 11.75% per year, Brazil also continues to offer investors a very advantageous relationship between interest and annual inflation expectations, estimated at 6.45%. This means that, for international investors, it is also worth taking cheap credit abroad to profit from Brazilian interest rates.

Brazilian oil and mining companies led the gains on the stock exchange this morning, but Petrobras did not follow. The government-controlled company retreated 2.17%. The mega-increase in fuel prices has once again put President Jair Bolsonaro (PL) on a collision course with the company’s board.

In the United States, stocks were oscillating close to stability. The Dow Jones and S&P 500 indexes rose 0.14% and 0.11%, respectively. Nasdaq was down 0.01%.

The day before, the Fed (Federal Reserve, the country’s central bank) announced the first increase in its interest rate since 2018. The increase of 0.25 percentage point was expected by analysts. There were also indications of six more highs by the end of the year.

Although tough, the Fed’s statement gave some predictability about the monetary authority’s next steps in its strategy to try to curb the country’s highest inflation in 40 years.

Interest rate hikes in the US could result in investors leaving Brazil as the return on investment in the US Treasury improves.

Analysts assess, however, that US interest rates remain very low – between 0.25% and 0.5% per year – and this should not cause capital flight in the short term.

our differential [relação entre nossa taxa Selic e a inflação doméstica, comparada ao exterior] is still attractive and this more favorable behavior of the dollar may continue in the short term,” said Camila Abdelmalack, chief economist at Veedha Investimentos.

Still on the perspective of heating up commodity prices, this sector has also gained momentum in recent days because China announced measures to support the market.

Beijing’s pledge sparked a strong recovery in Asia’s main stock markets, which had been sinking due to the advance of Covid-19 cases in some of the main Chinese cities.

Iron ore futures also rose on Thursday. It is the third consecutive session of highs. China is the main consumer of this material, as well as the largest producer of steel.

The Hong Kong Stock Exchange soared 7.04%. The index that tracks shares of Chinese companies listed in Shanghai and Shenzhen rose 1.96%. In Japan, the Tokyo Stock Exchange gained 3.46%.