By Geoffrey Smith and Ana Beatriz Bartolo
Investing.com – Higher energy tariffs could lift inflation above 8% in 2021. ADP updates private sector hiring in the US in August, an indicator considered a preview of Friday’s labor market report.
OPEC and its allies are meeting to decide on production levels for the coming months. China’s private sector contracted in August, but the eurozone is doing well, according to European Central Bank officials. And SEC’s Gary Gensler repeats his warnings to cryptocurrency traders.
Here’s what you need to know about the financial markets on Wednesday, September 1st.
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1. Water crisis pressures inflation in Brazil
The worsening of the water crisis was recognized by the government, with the Minister of Mines and Energy, Bento Albuquerque, asking in a statement on TV that the population save energy. According to the minister, the loss of hydroelectric generation is equivalent to the entire energy consumption of the city of Rio de Janeiro for about five months.
Yesterday (31), the government also announced the “water scarcity” tariff flag, which will cost R$ 14.20 per 100 kWh and which will be in effect until April of next year. The increase in the energy bill should push the value of inflation from 2021 to 8% per year approximately, according to estimates released by Valor Econômico.
The government also created a discount of up to 20% on the bill for those who save energy. Étore Sanchez, chief economist at Ativa Investimentos, however, does not believe that this program will have a significant impact on the IBGE, since the IBGE does not usually incorporate discounts into the index. According to the expert, inflation should maintain its bullish bias until next year.
To avoid a more significant increase in costs in 2022, the government asked Eletrobras (SA:) to anticipate a contribution of R$ 5 billion to the Energy Development Account (CDE) next year. The privatization proposal of the state-owned company provides for the payment of a grant to the National Treasury for the concessions of the hydroelectric plants and another annual amount to the CDE for 25 years.
Still, even with all these measures, Itaú does not rule out the possibility of rationing in the country. According to Valor Econômico, the bank doubled its estimates from 5% to 10% that there is a controlled distribution of the service.
CHECK: Brazilian stock quote
2. Payroll preview: ADP employment data
The payroll processor will publish its private sector hiring figures for the month through mid-August at 9:15 am EDT, a warm-up to non-farm payroll numbers – better known as – on Friday. fair. The market monitors US labor market data to project when the (Fed) will start withdrawing stimulus – or tapering in economic jargon – the monthly purchase of $120 billion government bonds and mortgages. According to a speech by Fed Chairman Jerome Powell last Friday at the annual Jackson Hole Symposium, data from the labor market will indicate the right time for the tapering, which may be later this year.
The correlation between the ADP and payroll numbers has weakened since the start of the pandemic, and last month’s large ADP deficit was resoundingly contradicted by government data two days later. Even so, a number above the expected 613,000 could be taken as an early warning of the kind of number that could trigger an immediate reduction in bond purchases (the reverse is also true, as my old math teacher loved to say). Atlanta Fed chairman, , will contribute his two cents in a speech at 1:00 pm.
The Institute of Supply Management industrial will also be released at 11:00.
As investors await the release of the day’s indicators, New York futures indices rose in the pre-market, reversing modest losses the day before. Around 8:14 am, the , and rose 0.27%, 0.32% and 0.21% respectively. Already the index fund that measures the performance of Brazilian stocks in New York, had a high of 0.71% in the pre-opening.
CHECK: US stock quote in the pre-market
3. OPEC+ must maintain the production increase plan
The world’s largest exporters of steel are scheduled to maintain their current course at meetings in Vienna, the organization’s headquarters, later on. Experts at the Organization of Petroleum Exporting Countries (OPEC) revised their demand forecast for this year and next on Wednesday, and now estimate oil demand to grow 4.2 million barrels per day (b/d) in 2022, almost 1 million b/d higher than before.
As such, analysts expect the cartel and its allies, led by Russia, to confirm that they will continue to add supply at the rate of 400,000 barrels a day each month, until all of last year’s emergency production cuts are reversed.
Doubts about the strength of demand from Asia’s main importers have eased in recent days after China said it had stopped the spread of Covid-19 in the country and the pace of vaccination increased rapidly in India. Both developments should support consumption in these markets. Indonesia and Thailand are also starting to relax some measures to contain the pandemic.
At 8:19 am, oil prices had risen slightly on Wednesday. Oil was up 0.04% at $68.53 a barrel, while it advanced slightly by 0.01% at $71.64 a barrel.
CHECK: Quotation of the main commodities global
4. Anticipation of the withdrawal of stimulus by the ECB on the radar; industrial slowdown in China
The chances of an early cutback in ECB bond purchases are starting to rise, though few expect this to happen before the Fed. bank began to reduce its asset purchases in the current quarter.
Their voices have been sidelined for most of the past 18 months, but the ECB vice president said in an interview on Tuesday that the zone’s economy had been performing better than expected and suggested raising its growth forecasts. when to meet next week. The accounts from the last ECB meeting noted for the first time since the pandemic that upside risks to their inflation forecasts should be taken seriously.
The eurozone’s fell in August but remained at historically high levels, while China’s, which tracks private sector manufacturing, fell below 50 for the first time since the spring of last year.
CHECK: Quotation of the main global indices
5. SEC warns of cryptocurrencies again
US Securities and Exchange Commission chief Gary Gensler repeated his warning that cryptocurrencies will need to accept tougher regulations, noting that they have become too big to not be properly governed.
“There are many platforms in operation today that would have better engagement, and instead there is a little. . . begging for forgiveness instead of asking permission,” Gensler told the Financial Times in an interview.
“With a value of about $2 trillion worldwide, it’s at the level and in nature that, if it has any relevance five or ten years from now, it will be within a public policy framework,” he said.
CHECK: Quotation of more than 5,000 cryptocurrencies
After dropping sharply during the reopening of the US economy, cryptocurrencies rebounded last month. it was operating up 0.48% to $47,698.9 at 8:25 am, while it was up 3.28% to $3,543.64, still profiting from a governance change that is set to improve its environmental and operational performance.