This Wednesday’s session was a steady high on the Ibovespa, despite a more timid performance in New York. The cause is exactly in the local scenario, where signals from the Central Bank of “absolute tranquility” with inflation resulted in a deceleration of the long-term interest curve. The fact that the index falls by almost 40% in 2020, in dollars, also helps in the performance, since the Brazilian stock market has prices less strained than abroad.
After adjustments, Ibovespa closed up 1.33%, at 97,012 points. At the maximum, at 97,955 points, the appreciation reached 2.31%, while at the minimum, at 95.653 points, the decrease was only 0.09%.
In New York, the session was marked by volatility in the face of uncertainties related to the performance of the global economy and about a new stimulus package. During the afternoon, the positive bias began to be traced with statements by the Mayor, Nancy Pelosi, that there will be a new round of negotiations.
At the close, Dow Jones rose 0.20%, S&P 500 advanced 0.30% and Nasdaq rose 0.37%.
The lower risk aversion abroad contributed to Ibovespa, but it was the local scenario that dictated the pace of business.
Early in the morning, the Central Bank released the Quarterly Inflation Report (RTI), with prospects that the IPCA will remain below the target in 2021. In addition, the president of the municipality, Roberto Campos Neto, said that the BC has “absolute tranquility ”With inflation and that recent price pressures should be limited to this year.
“The market has calmed down because a little bit of the black cloud has passed, but the fiscal risks follow,” says Thomás Gibertoni, specialist at Portofino Multi Family Office.
In addition to the BC’s signaling, the National Treasury decided to decrease the amount of long-term LTNs offered. As a result, long-term future interest rates are steadily falling. The Interbank Deposit (DI) contract for January 2025 fell from 6.43% to 6.21%, while the DI for January 2027 declined from 7.40% to 7.19%.
In addition to showing that the market is demanding less premium for taking risk, the Portofino expert explains that “well-adjusted” interest reflects on the Ibovespa’s share price, that is, on the valuation. This is because when projections are made, long interest is considered. “When the value rotates and brings it to present value, slightly lower interest rates mean higher value for the company. The long-term interest yielding reflects on the companies’ values ”, he explains.
Paloma Brum, economist at Toro Investimentos, says that Ibovespa’s positive performance reflects an improvement in the domestic scenario, mainly with the Central Bank signaling that the inflation boom is temporary, resulting in a low basic interest rate (Selic).
“But the external scenario remains more turbulent, with a new wave of coronavirus”, says the economist.
As a consequence of the pandemic, BTG Pactual projects a 32% drop in corporate profits in 2020, disregarding Vale and Petrobras. With the two giants, the projection is for a contraction of 28.8%. For 2021, the bank expects profit growth of 67.5% and, by including Vale and Petrobras, an increase of 111.8%.
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