Ibovespa opens down this Wednesday, 18th (Image: Money Times)
O Ibovespa (IBOV) opened trading this Wednesday (18) in decline. The main index of the Brazilian stock exchange slowed 0.05%, to 134,896 points, around 10:05 am.
The spot dollar was slightly down against the real in early trading on Wednesday, as investors make final adjustments to their positions ahead of the announcement of monetary policy decisions by the Federal Reserve and the Central Bank.
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5 things to know when investing in Ibovespa this Wednesday (18)
Super Wednesday is here: what to expect from Copom?
On the eve of monetary policy decisions, both in Brazil as we USAo Ibovespa closed yesterday (17), with a slight drop, below 135 thousand points.
The prevailing expectation in the market is a 25 basis point increase in the Selic rate, but there are those who predict a more aggressive increase of 50 basis points, recalls the analyst at Empiricus ResearchMatheus Spiess.
“After the announcement, I expect a more severe statement from the Central Bank, indicating the possibility of two more adjustments of the same magnitude by the end of the year, diverging from some analyses that predict an acceleration in the pace of adjustments,” he says.
The analyst also reiterates that the current level of 10.5% already imposes a strong restriction on the economy. “In addition, with the expectation of continued interest rate cuts in developed countries, especially in the US, new, more aggressive increases here may become unnecessary,” he concludes.
Is it Fomc?
Nos USAthe long-awaited Federal Reserve decision day has arrived. In addition to the decision, the Summary of Economic Projections (SEP) will also be released during a press conference by the institution's chairman, Jerome Powell.
“The Fed has been preparing for this moment, and the market is now pricing in a greater probability of a bolder cut of 50 basis points,” says Spiess.
Traditionally, the Fed avoids contradicting such widely held expectations — which, for the analyst, would be ideal if the communication had aligned the forecasts in a more cohesive way.
“I believe that a 25 basis point cut is the most likely outcome, adjusting the interest rate to the range between 5.00% and 5.25% per year. If the cut is 0.5 pp, Powell may adopt a more cautious tone, suggesting that the market should not expect a series of significant cuts in the next meetings”, he says.
On the other hand, a 25-point reduction would probably leave open the possibility of larger adjustments in the future. “Regardless of the outcome, the most important thing is that the monetary policy easing cycle will begin — and that is what really matters,” he says.
In addition, Spiess points out that the Fed's economic projections will also provide more detail. The report, which is updated quarterly, offers a view of the forecasts of the monetary authority's members, with emphasis on the so-called “dot plot”, which records the individual projections of the seven members of the Board of Governors and the 12 regional Fed presidents – 19 anonymous points in all, with the median of the estimates highlighted.
There have been about 50 interest rate cuts since 1990, and only seven of those have come when the S&P 500 was less than 1% away from a new all-time high (the index is currently at 5,634, close to its record high of 5,667.20 set in July).
“The only time the Fed has started a rate-cutting cycle so close to a record high was in July 1995, when the index rose 1.2% on the day and gained 11% over the next six months. If a recession is avoided, the next few months could be a positive for markets,” he said.
Asia: Concerns over Chinese deflation
Concerns about the deflation and its potential consequences for the world’s second-largest economy are growing rapidly. The central fear is that if the Chinese government does not act decisively to address deflation, the country’s economy could suffer irreversible damage.
“Deflation, characterized by falling prices, can trigger a negative spiral: with family incomes decreasing, consumption falls or is postponed in the expectation of further price drops, which affects business revenues, discourages investment and leads to more salary cuts and layoffs,” he ponders.
Spiess points out that some evidence suggests this spiral is already underway, as demonstrated by the decline in starting salaries compared to levels two years ago.
The president Xi Jinpingaware of this threat, recently called on local authorities to step up their efforts to ensure that the country meets its growth targets.
China's situation is often compared to that of Japan in the 1990s, when the country faced a long stagnation after real estate and financial bubbles burst.
However, the analyst states that in certain aspects, the South Korea at the end of the last century might be a 'more apt' analogy. Even so, China is significantly larger and more influential globally, and its slowdown is already causing concern in developed economies such as the US.
“The big challenge for leaders in Beijing is to revive the engines of growth, offsetting the impacts of the weakened real estate market. Part of this strategy involves strengthening ties with the Global South, which includes developing countries in Africa and South America,” he says.
China hopes these emerging markets will absorb its production of electric vehicles and solar panels, which would help “alleviate the domestic economic slowdown.”
Braskem (BRKM5), Petrobras and Novonor respond to the progress of the sale of a stake in the petrochemical company
A Braskem (BRKM5) stated that it is not conducting negotiations regarding its shareholdings and that it has no knowledge of the sale of a stake in the company by Novomor (formerly Odebrecht), after questioning by the Securities and Exchange Commission (CVM).
On Sunday (15), columnist Lauro Jardim from O Globo reported that a new attempt to find a solution for the petrochemical company, whose sale has been speculated for two years, was being made.
According to the column, the creditor banks, Bradesco, Itaú, Santander, Banco do Brasil and BNDES, are studying the creation of a fund in which the credits would be converted into shares of the petrochemical company. In this way, the banks, together with Petrobras (PETR4), would come to co-control Braskem, while Novonor would have a stake of less than 5% of the total.
Weg (WEGE3) will invest R$670 million in expansion in Brazil and Mexico
A Road (WEGE3) reported this Wednesday (18) that it will invest approximately R$ 670 million, over the next five years, in expanding the capacity and verticalization of its business. transformers and electric motors in Mexico and Brazil.
In Mexico, the investments will be earmarked for the construction of a new building for the production of wires in the city of Atotonilco de Tula, in addition to the acquisition and installation of equipment. The objective is to meet the current and projected demand for wires and cables used in the transformer and electric motor business in North America.
The planned investment is approximately R$336 million over the next five years, according to Weg.
*With information from Reuters