RIO DE JANEIRO, BRAZIL – The IBOVESPA, the main stock market index in Brazil, climbed 1.4 percent on Monday and closed at 88,620.10 points – its highest mark since March 10th, the last trading session before losing 90,000 points. On the investors’ radar was optimism over the economic rebound, after positive figures from Chinese industries and the Euro Zone.
This week, China again showed robust economic figures. Released on Sunday night, the Chinese Industrial Purchasing Managers’ Index (PMI) came in at 50.7 points, up from 50 points, which signals growth from activity contraction.
The result boosted Asian markets, which closed positive, also absorbing Friday’s highs in Western markets. Industry figures also came in positive in the Euro zone. Although below 50 points, the 39.4 European PMI in May came in almost in line with expectations and better than the 33.4 points recorded in April.
Bruno Lima, Equity Analyst at Exame Research, sees the bullishness driven mainly by the local market. “They are reducing short position and buying index. There are no foreigners”.
Despite the bullish stock market, the Brazilian real depreciated against the dollar, evidencing foreigners’ reduced interest in Brazilian domestic assets.
In the stock market, not even the escalation of tensions between China and the United States had an impact on the stock market. “The market is highly complacent.It believes in a V-shaped recovery. But the data already shows that it won’t be,” Lima said.
According to Bloomberg, the Chinese government has ordered its state-owned companies to stop purchasing US agricultural products.
The relationship between the two countries, which was already sour, further deteriorated last week when the Chinese parliament passed the national security law on Hong Kong, seen as an attempt to increase control over the autonomous territory. On Friday, President Donald Trump announced targeted retaliations, but did not threaten the first stage of the trade agreement, which served as a relief to the market.
But according to Gustavo Bertotti, economist at Messem Investments, the Chinese retaliation against the US agricultural sector could jeopardize the first stage of the agreement, given that US soy imports were part of the negotiations. “Let’s see how the US government will respond. Until then, they’re more relaxed.”
In the United States, the S&P 500 index closed up 0.39 percent. In Europe, the main stock indices closed higher by over one percent, still absorbing Trump’s milder statement on Friday after the European stock exchanges closed.
In the stock market, securities linked to the economic reopening led the session’s highs. The travel and aviation sectors were the highlight. Showing the top growth rates, GOL shares soared 8.56 percent, while CVC and Azul shares climbed approximately 7.5 percent. The stocks of retailer Via Varejo, shopping mall companies Iguatemi and Multiplan, rose 8.3, 7.7 and 7.6 percent, respectively.
Source: Exame