Brazilian ADRs index softens fall after Fomc minutes, but remains down more than 1%

The Dow Jones Brazil Titans 20 ADR index, which brings together the main Brazilian companies listed on the B3 with share receipts traded in the United States, registers a fall this holiday on the B3 of Nossa Senhora Aparecida, as well as the EWZ, the main Brazilian ETF traded on the American market. , which replicates the MSCI Brazil index.

The Dow Jones Brazil Titans 20 ADR and the EWZ opened lower, with the downward movement gaining strength in the afternoon, to a low of around 2%, on the eve of the release of the minutes of the last meeting of the Federal Open Market Committee (FOMC) . At 15:08 (Brasília time), shortly after the release of the document, the ADRs index slightly eased the low, but still fell 1.40%, to 17,009 points, while the EWZ had a low of 0.44%, the US$ 31.52.

Fomc members highlighted in the document that they need to adopt a more restrictive monetary policy – ​​and then maintain it for some time – in order to meet the US central bank’s target of reducing inflation. Many of them “emphasized that the cost of taking few steps to reduce inflation probably outweighed the cost of taking many steps.”

It was also highlighted that it was important to “calibrate” the pace of further interest rate tightening with the objective of mitigating the risk of significant adverse effects on the economic outlook.

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At the meeting that concluded on Sept. 21, Fed officials raised interest rates by 0.75 percentage points for the third straight time in an effort to reduce inflation from 40-year highs. Fed Chair Jerome Powell later promised that he would “continue to do so until we are confident the job is done.”

Earlier, the US producer price index (PPI) was released, which rose more-than-expected in September amid sharp rises in the cost of services and goods, suggesting that inflation in the country could remain uncomfortably high for a while. time.

PPI for final demand rose 0.4% last month, the Labor Department said. August data was revised down and showed the PPI indicator falling 0.2% instead of retreating 0.1% as previously reported. In the 12 months through September, the PPI is up 8.5% after advancing 8.7% through August. Economists polled by Reuters had forecast PPI rising by 0.2% and rising 8.4% year-on-year.

Data to be released on Thursday is expected to show consumer prices rising in September, according to a Reuters poll of economists, sealing the case for the Federal Reserve to raise interest rates by 75 basis points next month for the fourth time. this year.

Financial markets virtually priced in a rate hike of this magnitude at the Fed’s Nov. 1-2 meeting, according to CME’s FedWatch tool.

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On Wall Street, the session is unstable, with the main indices oscillating between slight losses and gains throughout the session. Major indices opened lower; however, in the very first negotiations, they turned slightly higher. In the early afternoon, they traded close to stability and then moved higher, with the Dow Jones up 0.40%, the S&P 500 up 0.18% and the Nasdaq up 0.26%.

Returning to Brazilian assets, among the most liquid ADRs, Vale’s (VALE3) was down around 1% on news that China has no immediate plans to ease the strict restrictions to control Covid, which impacts demand for ore. Petrobras (PETR3; PETR4) also sees its ADRs falling between 1.5% and 2% – both the PBR, referring to PETR3 shares, and the PBR-A, equivalent to PETR4 shares – with a decrease of around 2% of the Brent oil futures contract traded for December, at around US$ 92 a barrel, with the impact of the strong dollar and concerns about demand.

The Organization of the Petroleum Exporting Countries (OPEC) further revised its forecast for an increase in global oil demand in 2022 downwards from 3.1 million barrels per day (bpd) to 2.6 million bpd, according to with a monthly report published this Wednesday, 12. OPEC estimates that the production of the Organization for Economic Co-operation and Development (OECD) will account for 1.4 million bpd and countries outside the group, for 1.3 million bpd . For 2023, the organization also cut its forecast for a rise in global consumption, from 2.7 million bpd to 2.3 million bpd.

In the national political news, attention to new election polls. A PoderData survey released this Wednesday showed stability in the second round of the presidential election, with former president Luiz Inácio Lula da Silva with 48% of voting intentions, while reelection candidate Jair Bolsonaro (PL) adds up to 44%, both maintaining the same levels as the survey released last week.

Also according to the survey, blank and null votes add up to 6% and undecided votes are 2%, also a maintenance in comparison with the previous survey.

By the criterion of valid votes, which excludes white, null and undecided votes, Lula appears with 52% against 48% for Bolsonaro, the same scenario in last week’s poll. PoderData listened to 5 thousand people by phone between October 9th and 11th. The poll’s margin of error is plus or minus 1.5 percentage points.

UK instability and stock market crash in Asia

Asian stock markets closed at two-year lows on Wednesday, weighed down by signs that China has no immediate plans to ease tough Covid-19 restrictions. The most liquid iron ore futures traded on the Dalian Exchange, due in January 2023, traded near stability at 714.5 yuan ($99.60), up 0.14%.

Meanwhile, a persistent rally in the dollar and swings in the UK bond and currency markets have shaken investor confidence.

After a busy session, the pound emerged from a two-week low, helped by a report from the Financial Times that the Bank of England (BoE) is prepared to extend its bond-buying program beyond Friday. The day before, the monetary authority had scared the markets by threatening to withdraw support until Friday.

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However, the Bank of England reinforced on Wednesday that its bond-buying program to support UK pension funds would end on Friday as planned, a message that was “absolutely clear” in contacts with banks. “BoE Chairman Andrew Bailey confirmed this position yesterday (Tuesday) and made it absolutely clear in contact with the banks at higher levels,” he said in a statement.

“Improvised changes in UK economic policy leave more question marks than answers regarding credibility and are a headwind for pound-linked assets,” wrote Stephen Innes of SPI Asset Management.

“It is very rare for such a mismatched mix of policy and policy communications to be made by the new Conservative government,” former US Treasury Secretary Larry Summers said at the Citi investment conference in Sydney.

On the economic agenda, industrial production in the euro zone rose 1.5% in August compared with the previous month, according to data from Eurostat, the official statistics agency of the European Union. Economists consulted by the Wall Street Journal expected an increase of 0.5% in the period.

UK industrial production fell by 1.8% in August compared to July, according to data published by the country’s Office for National Statistics (ONS). The result was below the expectations of analysts consulted by the The Wall Street Journalwhich predicted stability in the period.

Weakening manufacturing and maintenance work at oil and gas fields in the North Sea contributed to a 0.3% drop in British gross domestic product since July. A Reuters poll of economists indicated zero growth.

(with Reuters)

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