Stock market falls 1.82% with fiscal risk and Magalu and Vale falls

The Brazilian Stock Exchange closed down 1.82%, to 104,403 points, this Tuesday (16), reflecting uncertainties regarding the domestic fiscal risk.

The dollar rose 0.75% to R$5.4990 as local operations returned from a holiday and echoed the strength of the US currency abroad and renewed domestic fiscal concerns.

Earlier this Tuesday, the market started to operate with a downward bias after evaluating the worsening of projections for the Brazilian economy, with signs of retraction, according to the bulletin by Ativa Investimentos.

The IBC-Br (Bank Economic Activity Index) dropped 0.27% in September compared to August.

The debate around the PEC (Proposed Amendment to the Constitution) of the Precatório, scheduled to be voted on next week in the Senate, also raised concerns. This is the second negative result in a row. In August, there was a drop of 0.29%. Last month, the BC announced that the retraction would be 0.15%, but the data was revised.

President Jair Bolsonaro (no party) once again stated this Tuesday that he intends to use part of the fiscal slack generated by the possible approval of the PEC dos Precatórios in the granting of salary increases for federal employees.

The PEC is presented by the government as a way out for the payment of the Auxílio Brasil, since the approval of the measure will allow the Union to delay the payment of part of its judicial debts foreseen for 2022.

The market, which initially reacted negatively to the measure, started to tolerate the PEC as a better option than the increase in expenses without counterparts.

On Tuesday, the retail sector also returned last week’s gains and, in addition, the mining sector was hurt by another drop in iron ore.

Shares in Vale and Magazine Luiza, which fell 12.65% and 2.88%, respectively, were among the biggest casualties.

As has been happening with major retail companies, Magalu has recorded lows since the release of its third quarter results, when it reported a 90% drop in profits and a slowdown in sales.

In the weeks prior to the disclosure of the balance sheet, the company purchased R$193.2 million of its own shares, accelerating its buyback program scheduled to end in 2023, according to a document sent by Magazine Luiza to CVM on the last 10th.

The trading session was also marked by adjustments to the movement of Brazilian ADRs (receipts for shares traded in the United States) the day before, when there was no trading on the Stock Exchange due to a public holiday in Brazil.

Among the positive highlights, Petrobras shares advanced 1.04%, stimulated by the slight increase of 0.21% in oil, due to international projections on the maintenance of demand. Brent barrel closed at US$ 82.22 (R$ 450.28).

This Tuesday, B3 (Brazilian Stock Exchange) inaugurated a replica of the Wall Street Bull in front of its headquarters, in the central region of the city of São Paulo.

The sculpture, according to its creators, has the purpose of publicizing the variable income investment market for the population of the country. Currently, around 3.5 million individuals invest in the Stock Exchange.

In the United States, the Dow Jones, S&P 500 and Nasdaq indices rose 0.15%, 0.395 and 0.79%.

The dollar index against a basket of rich countries’ currencies jumped 0.37%, to highs in 16 months, after economic data in the US reinforced expectations of monetary tightening to control inflation, a move that favors the US currency.

Fund managers consulted by Bank of America significantly worsened expectations for the level of the dollar against the real at the end of 2022, after a period of strong tension in the financial market due to domestic fiscal and monetary uncertainties abroad.

In this November survey, BofA (Bank of America) said that more than 40% of managers see a quotation between R$ 5.41 and R$ 5.70 at the end of 2022.

With Reuters. Lucas Bombana collaborated