RIO DE JANEIRO, BRAZIL – The Ibovespa, the main index of the São Paulo stock market, B3, rose 1.2 percent this Wednesday, December 4th, and, for the first time, closed above the 110,000-point benchmark, breaking a new record. The indicator ended the trading session at 110,301 points. The previous high was recorded on November 7th, when the stock market reached 109,580 points.
The increase in oil and iron ore prices – which appreciated the shares of Petrobras and Vale -, the above-expected growth of the Gross Domestic Product (GDP), released on Tuesday, December 3rd – which signaled a turnaround in economic activity in the country -, and the potential for a truce in the trade war between the United States and China influenced the appreciation of securities.
“The significant rise in some commodities, such as oil and iron ore, as well as the good response to the strategic plans that Petrobras and Vale disclosed to investors, contributed to the rise in Ibovespa,” says Glauco Legat, chief analyst at Necton.
Other positive news also contributed to the stock market’s record-breaking performance. Industrial production grew 0.8 percent in October compared to September, according to IBGE, exceeding expectations. This was the third month running of expansion in the primary sector. It was the best result since 2012. “Industry development has renewed the sector’s momentum, which used to experience not so favorable rates,” says Simone Pasianotto, chief economist at Reag Investimentos.
Trade war
On the international stage, investors were optimistic about the news that the United States and China were close to a consensus on the tariff war. “The discussions are going very well and we will see what happens,” US President Donald Trump told reporters at a NATO leaders’ meeting near London.
The tension eased further after Bloomberg reported that the two sides are closer to agreeing on how many tariffs will be reversed in “stage one” of a trade pact. The day before, the climate was one of caution in the face of Trump’s allegations about deferring the trade deal with the Chinese until after the presidential elections in 2020.
Optimism
The announcement made the day before that GDP rose 0.6 percent in the third quarter of 2019 when compared to the second quarter is still reverberating. Optimism about Brazil’s economy sustained part of the Ibovespa’s rise. “The GDP result confirmed the reading that there is a clear improvement compared to the end of 2018 and beginning of 2019,” said Thiago Xavier, of the consultancy Tendências. “In light of an initial reading of the third quarter data, growth in 2019 is expected to be close to 1.2 percent (and no longer 0.9 percent), and also boosts the 2020 projection, currently at 1.8 percent.”
Source: Veja