Brazil’s Ibovespa up 1.5% boosted by commodities in highly volatile day

RIO DE JANEIRO, BRAZIL – After a highly volatile session, Ibovespa closed up on Tuesday, November 23, back to the 103,000-point level.

For a good part of the day, the stock market found support in heavyweight shares, such as Vale and Petrobras, boosted by the rise in commodity prices in the international market. Foreign markets helped only in the last hours, as the indexes in New York began operating in an upward trend.

In the domestic scenario, inflation fears and concerns about the progress of the PEC (Constitutional Amendment Bill) in the Senate continue to weigh on investors’ decisions. The Constitution and Justice Committee (CCJ) has scheduled a meeting for today (24) at 9:30 AM to present rapporteur Fernando Bezerra Coelho’s opinion on the PEC.

In the CCJ, the quorum required to pass the PEC is a simple majority. Thereafter, the matter would be able to be placed on the agenda in the Senate. In plenary session, the government needs the support of at least 3/5 of all senators (i.e. 49 of the 81) in two voting rounds. By rule, both legislative houses must pass the same draft of the text for it to be enacted and become law.

The room the PEC will open in the 2022 budget to finance “Auxílio Brasil” (Brazil Aid) and the consequences of this decision are issues that concern the market. The Federal Supreme Court (STF) opened a vote to allow the issue to be put to a vote in 2022 without violating electoral laws, signaling that the issue may not be resolved this year. The parliamentary recess is only a short time away.

The Ibovespa closed 1.5% higher at 103,653 points. The traded volume reached R$30.6 (US$5.5) billion. Ibovespa futures for December 2021 accelerated gains in recent trading and closed up 2.06% at 104,500.

“The market started well and kept holding on because of commodities. Vale (VALE3), Petro (PETR3;PETR4) and steel companies helped the Ibovespa today. This is a reflection of China, which has signaled that it may help the market, particularly the real estate market,” said Ouro Preto Investimentos analyst Bruno Komura.

Iron ore prices in China’s Dalian Stock Exchange rose 10% in the early hours of Tuesday morning. Oil prices also soared, even as the United States, China and India said they will use reserves to try to lower the price of the raw material. The Brent barrel rose 3.5% to US$82.49; the WTI barrel increased 2.53% to US$78.69.

The commercial dollar closed up 0.27%, at R$5.608 to buy and R$5.609 to sell. The future dollar with maturity in December closed down 0.28% at R$5.576.

In the after hours futures interest market, the DI for January 2023 dropped 8 basis points to 12.26%; DI for January 2025 declined 16 basis points to 11.95%; and the DI for January 2027 dropped 18 basis points, to 11.78%.

In the United States, the Dow Jones closed up 0.55%, at 35,813 points; the S&P 500 rose 0.17%, at 4,690 points; and the Nasdaq technology stock market closed down 0.5%, at 15,775 points, impacted by the high yields of Treasury bonds.

During most of the day, the U.S. indices traded down, reflecting the potential anticipation of an early reduction in the purchase of government bonds (tapering) by the Federal Reserve, the U.S. central bank, and a possible rise in U.S. interest rates as early as next year. This perception grew stronger yesterday after President Joe Biden decided to reappoint the current chairman of the Fed, Jerome Powell, to the post.

“The market is starting to believe that tapering will accelerate and interest rate hikes will occur before mid next year. This has negatively impacted global markets,” said Ouro Preto’s Bruno Komura.

The maintenance of stimulus measures to the detriment of escalating inflation has been a cause for concern among investors. In Europe, where prices are rising to historical levels, monetary authorities are signaling that stimulus measures may be reduced. The rise in the number of Covid-19 cases, with new restrictions being enforced in countries like the Netherlands, Austria, and Germany, is exerting further downward pressure on stock markets.

“As far as indicators are concerned, consumer confidence in the euro zone came in below expectations in November. The region’s PMIs (Purchasing Managers’ Indexes) positively surprised market estimates, but should lose steam in the coming monthly reports and point to a slowdown in local economic activity,” points out an XP report released yesterday.

The Stoxx 600 index comprising companies from key sectors in 17 European countries closed down 1.28%.