Five hot topics for Brazil’s stock market in the coming days

RIO DE JANEIRO, BRAZIL – In the economy, IBC-Br is showing a boost in activity after a positive retail surprise 2 weeks before the COPOM. The CPI in the U.S. and Chinese economic data are foreign highlights. B3 will have options maturing.

ACTIVITY AND INFLATION

Two weeks before the COPOM meeting of the Central Bank, the market will monitor activity and inflation data in order to fine-tune its stakes for the SELIC rate. After the IPCA inflation rate surpassed estimates, the projections of a hike in the interest rate came close to 1.5 percentage points, but DIs retreated on Friday reflecting the calming of the political scene.

The IBC-Br for July, considered a pre-release of GDP, will be announced on September 15 and is estimated to be up 5% month-on-month and 0.5% year-on-year. The services data will be released one day before. The retail figure released yesterday exceeded estimates.

On September 16, the IGP-10 for September will be released, with an expected deceleration to 0.4%, from 1.18% the month before. Four-weekly IPC-Fipe and IPC-S will also be released in the coming days. In the stock market, next week will see the maturity of Ibovespa and stock options on September 15 and 17.

CPI IN THE USA

Inflation in the U.S. is in the spotlight amid expectations about when the Fed will begin to withdraw stimulus. The August CPI (Consumer Price Index) on September 14 is estimated to decelerate slightly. Also on the radar are the Retail Sales Index, Industrial Production and Empire Manufacturing.

Saturday, September 11, marked the 20th anniversary of the Twin Towers attack in New York City. The milestone comes shortly after the U.S. withdrew from Afghanistan, where attacks were planned. Apple is expected to launch new iPhones on Tuesday. In China, retail and industry figures will be released, which may be heavily impacted by Covid’s Delta variant.

DURATION OF RELIEF IN BRAZIL

After Jair Bolsonaro’s step back on Thursday afternoon led to a strong rally in domestic assets, the President confirmed the milder tone in his weekly live stream. He stated that he has never attacked institutions and that he is ready to talk with leaders of other branches of government. Bolsonaro once again advocated the printed ballot but said that the official statement released on Thursday should bear good fruit.

Chamber and Senate presidents Arthur Lira and Rodrigo Pacheco celebrated the change. However, the call for a truce was met with skepticism by members of the Supreme Court and it is not expected to change the course of its investigations.

The truckers’ protest, which has not yet ended, is also under close focus. The protests were expected to continue until September 12 and then be suspended. Should it exceed this date, there will be a serious problem, Bolsonaro said.

REFORMS AND PRIVATIZATION

After relief in the institutional tension, a more consistent improvement in the market depends on the advance of reforms. The government is negotiating with Senate president Rodrigo Pacheco the vote on a minimum economic agenda in the coming weeks.

The income tax reform, the new legal frameworks for railroads and foreign exchange, the bills establishing the “BR do Mar” (program to encourage coastal shipping) and the Correios (Brazilian Postal Service) privatization would be on the agenda.

The Senate should also discuss the payment of court-ordered federal debt and the redesign of the “Bolsa Familia” (Family Grant) program concurrently. However, the reforms are still faced with the same obstacles in place before the President retreated. The Brazilian telecom regulator ANATEL is expected to confirm the 5G auction notice on Friday.

COURT-ORDERED DEBT AND THE SPENDING CAP

On the court-ordered debt issue, both the political wing of the government and the congressional leadership are working in search of a narrative in favor of removing these payments from the constititional spending cap, said two people with direct knowledge of the matter. The Economy Ministry is resisting the idea, they said.

Questioned, the Ministry said it is seeking a permanent solution and has sent a proposed constitutional amendment to Congress. The Ministry also reiterated the importance of the spending cap for the balance of public accounts.