Ibovespa Rises Strongly on News of USA Trillion-dollar Package, Exceeds 76,000 Points

RIO DE JANEIRO, BRAZIL – The IBOVESPA was booming on Wednesday afternoon, March 25th, with the potential for the US Senate to pass a package of incentives of over US$2 trillion. The measure represents one of the most widely awaited by the financial market.

At 2:44 PM, the main index of the Brazilian stock market climbed 9.68 percent and recorded 76,477.96 points, the daily maximum.

The American measure should serve various sectors of society, such as small and large companies and state and municipal governments, in addition to providing a daily allowance for low- and middle-income families of US$1,200 per adult and US$500 per child.

“Along with the recent efforts by the world’s major central banks and the improved technical framework of the markets, the new spending package has helped rekindle investors’ appetite for risky assets,” wrote analysts from Guide Investments in a client report.

On Monday, March 23rd, the Federal Reserve, the US central bank, announced another package that provided loans to large employers equivalent to up to four years of financing and special credit lines for families. The measure, coupled with hopes that the US government’s trillion-dollar bill would be passed, led the Dow Jones index to record its highest rise since 1993, up 11.37 percent from the day before. On Wednesday, the index climbed a further six percent.

Despite the positive mood in the markets, Jason Vieira, chief economist of Infinity Asset, believes that these incentives may be insufficient to withstand the impacts of the coronavirus (Covid-2019). “We spent a decade sustaining meager growth in several places, burning what we had from monetary policy packages. And the European fiscal situation, with the exception of Germany from half a handful of countries, is in trouble,” he said.

Last week, the US investment bank JPMorgan cautioned that the pandemic should result in dramatic recessions in emerging countries, and could reach 12 percent in Latin America. In Turkey, the extent of the recession is expected to be 17.2 percent, according to the bank.

“We were fighting with all our weapons, to prevent what would be an average recession, now we are going with all our weapons to one of global dimensions in vulnerable countries,” Vieira said. According to the economist, a very long quarantine could lead to an economic depression that would impact a decade’s growth. “There is a division in the market regarding the shutdown perspective. The economic estimates are fatalistic as the overall lockdown time increases”.

Among Brazilian investors, it also reflects the latest statements by President Jair Bolsonaro on a national broadcast. “[He] managed to be criticized by everyone, for the attacks against the press, governors and health experts. The overall feeling is that the figure of a crisis administrator in the government is also lacking,” said Alvaro Bandeira, chief economist of the digital bank Modalmais, in a morning review.