Hong Kong situation returns to radar and tension between the United States and China brings caution to business

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The approval of the Chinese national security law for Hong Kong sours international markets this morning. New York futures indices and major European markets operate in the red, despite new signs of rapid recovery in the Asian giant’s economy. Investors are expecting the news to intensify tension between the United States and China. Abroad, the speech of Jerome Powell, president of the Federal Reserve, in the US House of Representatives (13:30) also deserves attention.

In Brazil, the highlight is the disclosure of the unemployment rate for the quarter ended in May by the IBGE (9 am) and the participation of the Minister of Economy, Paulo Guedes, in the Mixed Commission on the covid-19.

Reheating

New signs that the Chinese economy is recovering at a faster than expected pace cheered up Asian investors overnight, with exchanges on the continent ending the session up.

China’s industrial sector purchasing manager index (PMI) rose from 50.6 in May to 50.9 in June, the highest level in the past three months. Analysts were expecting the index to decline. The country’s service PMI also advanced, from 53.6 in May to 54.4 in June.

The news helped defuse the tension that arose with the passage of the national security law for Hong Kong, which is expected to increase Chinese control in the country. The new law will take effect from tomorrow (01). The topic has been a reason for friction between China and the United States and the new chapter should also rekindle tensions between the powers. The United States had threatened to impose new sanctions on the country if China went ahead with the plan.

Yesterday, Wilbur Ross, secretary of commerce for the United States, said that Hong Kong’s special status – which offers the former British colony preferential treatment over China – was revoked.

If in Asia the positive economic results erased the signs of caution, in Europe investors do the opposite. The prospect of a worsening relationship between the United States and China makes risk aversion prevalent in the last trading session of the semester.

In the United States, after a session of euphoria with the new actions of the Federal Reserve, the future indices indicate a trading session marked by caution and operate in the negative.

On the Fed trail

The markets continue to act as BCs around the world to shield the economy from the effects of coronavirus, betting mainly on the Federal Reserve (Fed, the American central bank). Yesterday, during the afternoon, investors reacted well to the announcement that the Fed will buy more corporate debt securities in the primary market.

The Ibovespa, which started the day with the greatest caution, followed the American stock exchanges and advanced 2.03%, to 95,735.35 points. The dollar ended the session down 0.62%, to R $ 4.4265.

Emergency aid

President Jair Bolsonaro is due to announce today the extension of emergency aid to informal and unemployed workers. The extension of the program may have an extra impact of R $ 100 billion in 2020.

The government expects to release an additional R $ 1,200 per beneficiary and is studying two proposals: the payment of three more installments (R $ 500, R $ 400 and R $ 300) or in two installments of R $ 600.

Schedule

In Brazil, today we have the disclosure of the unemployment rate for the quarter ended in May by the IBGE (9 am), confidence in the services sector in June (8 am) and the deficit in the consolidated public sector (9:30 am). Attention also to the participation of the Minister of Economy, Paulo Guedes, in the Mixed Commission on the covid-19.

In the United States, one of the highlights of the day is the speech of Jerome Powell, president of the Federal Reserve and Secretary of the Treasury, Steven Mnuchin, in the United States House of Representatives (1:30 pm). The theme is the economic response to the covid-19 pandemic. The industrial activity of ISM / Chicago in June will also be announced (10:45 am).

Swings

  • IRB’s profit was R $ 13.874 million in the first quarter, down 92%. The company also re-presented the financial statements for 2019 and 2018, after analyzing irregularities of the former management. Check here the main numbers of the reinsurer.
  • Equatorial Energia recorded adjusted net income, considering non-recurring effects, of R $ 375 million, an increase of 118.2% in the annual comparison. Adjusted EBITDA amounted to R $ 1.069 billion, an increase of 77%.
  • Centauro obtained net income of R $ 8,140 quarter, considering the effects of IFRS 16, reversing a net loss of R $ 4,143 million in the same period of the previous year. Ebitda totaled R $ 45.865 million in the first quarter, showing a drop of 43.7%.
  • Gol had a loss of R $ 2.28 billion in the first quarter, seventy times worse than in the same period last year.

Keep an eye

  • BTG Units were priced at R $ 74.40. The offer moved R $ 2.69 billion, which will be invested in improving the bank’s digital area.



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