IBOVESPA Up Over Two Percent with Trump Recovery; Petrobras Soars Five Percent

SÃO PAULO, BRAZIL – The Brazilian stock market began the week strong, following the positive external scenario, with investors optimistic about US President Donald Trump’s recovery, after being infected with coronavirus. IBOVESPA, the main B3 stocks index, climbed 2,21 percent and closed at 96.089,10 points. The trend was driven by Petrobras stocks, which rose in line with the price of a barrel of crude oil, which rose more than six percent.

Trump

After spending the weekend in hospital, requiring oxygen, the President was discharged on Monday, October 5th, according to his physicians. With the reduced uncertainties that took over Friday’s trading session, when the American president was diagnosed with coronavirus, the appetite for risk assets from international investors increased, which contributed to the positive note on the stock markets. “There are still noises about Trump’s medical condition and the potential impacts of its contamination on the election race. But, at least this Monday, the investors’ reaction is positive,” assess Exame Research analysts in a report. In the United States, the S&P 500 index rose 1.81 percent and the Nasdaq, 2.32 percent.

Petrobras

The price of a barrel of crude oil soared six percent, with news about Trump’s recovery. The high boosted Petrobras ordinary and preferred stocks, which closed with rises of 4.9 and 5.31 percent. As a large factor in the index, the oil company’s stocks appreciation contributed to sustain the positive tone in the Brazilian stock market. On Friday, the company’s stocks dropped over four per cent, following the commodity’s depreciation, amid the uncertainties about the American president’s illness.

In the last trading session, not even the Federal Supreme Court’s (STF) authorization for the company to sell refineries without the endorsement of Congress prevented the sharp drop. “Petrobras’ shares were more battered than they should have been on Friday. Today it is rising with the oil high. But there are grounds for this, considering the STF decision,” says Adilson Bonvino, Partner at Unnião Investments.

Vale

In addition to Petrobras’ shares, mining giant Vale’s shares contributed to the IBOVESPA high, rising by 2.18 percent. Part of the trend is based on a Reuters news story in which Vale’s director of basic materials states that the mining company is negotiating the supply of Canadian Nickel for Tesla car batteries and other electric vehicle companies. “Although there are no further details and Tesla has not commented on the matter, the signaling has positive implications. After all, the electric vehicle sector has a strong growth prospect and the demand for battery components tends to increase,” say analysts from Exame Research.

Guedes and Maia

In Brazil, politics should also attract market attention, with indications of a rapprochement between the Minister of Economy, Paulo Guedes, and Chamber of Deputies President Rodrigo Maia. Last week, the climate soured between the two, after Guedes stated that the social security systems were not progressing due to an alleged agreement between Maia and left-wing legislators. The accusation was refuted by the Chamber president who even suggested that the Minister should watch the movie “The Fall”, about the last hours of dictator Adolf Hitler, and called him “unbalanced”. But spirits cooled down and on Monday they were to participate in a reconciliation meeting at the home of the Federal Audit Court (TCU) judge Bruno Dantas. According to the newspaper O Estado de S. Paulo, the meeting was organized by Senators Renan Calheiros and Katia Abreu.

“Brazil has been suffering greatly from this political issue. This approach between Guedes and Maia provides a relief to the market because the focus of the Legislative and Executive becomes one. This generates some expectation about fiscal adjustments,” comments Bonvino.

With the favorable political scenario, Eletrobras shares climbed 5.46 percent. Recently, the company’s shares have been the thermometer of the market’s expectations about a potential privatization, which would require articulation of the Executive with Congress.

Economic Data

Disclosed on Monday, the September Purchasing Manager Index (PMI) outperformed market estimates in the Eurozone and major European countries. The positive highlight was the United Kingdom’s composite and services PMIs, which reached 56.6 and 56.1 points respectively, well above the 50 points that mark out and expand the contraction of economic activity. On the other hand, although above expectations, the Euro Zone services PMI fell below the line, at 48 points. In the United States and in Brazil, the main activity indexes also remained above 50 points, in line with the expectation of an economic rebound.

Source: Exame