By Geoffrey Smith and Ana Beatriz Bartolo
Investing.com – The radicalization of President Jair Bolsonaro’s speech with threats to the STF in the pro-government demonstrations on September 7 brings down the price of Brazilian assets.
The European Central Bank may announce that it will scale back its bond-buying program, while government officials suggest that recent weak economic data is not enough to push the start of the taper for next year. The weekly data on claims for unemployment benefits released at 9:30 am may reinforce this perception. As a result, stocks on both sides of the Atlantic are facing difficulties.
China is increasing pressure on video game companies just before its new underage playing time limits go into effect. Commodity prices continue their record rally, with nickel, aluminum and reaching multi-year highs.
Here’s what you need to know about the financial markets on Thursday, September 9th.
CHECK: Investing.com’s Complete Economic Calendar
1. Defensive posture with institutional crisis
The escalation of political conflict between President Jair Bolsonaro and the other powers is frightening investors, who prefer to adopt a more defensive posture. Yesterday (8), it closed down 3.78%, to 113,413 points, the biggest fall since March, when the STF made former president Lula eligible. The dollar had a high of 2.93%, ending the day quoted at R$ 5.3276. In the interest rate market, some longer maturities returned to the 11% level.
According to analysts interviewed by the newspaper Economic value, political tension compromises the advancement of the economic agenda, since with Bolsonaro isolated, there is greater difficulty in approving the reforms. In addition, the lack of confidence also harms the economic recovery and raises an alert for the country’s fiscal issue.
The threat of an institutional breakdown causes the risk premium to rise, alienating the international investor and putting pressure on exchange rates and interest rates. For economic consultant Zeina Latif in an interview with Value, Bolsonaro is likely to deliver the economy worse than when he received it and is undermining international investors’ confidence in Brazil’s political institutions.
2. Should the ECB start cutting back on stimulus?
The European Central Bank (ECB) could beat the Federal Reserve to end the extraordinary monetary stimulus that has been in place since the first phase of the pandemic.
The ECB’s board of directors will say at 9:45 am whether it will reduce its monthly bond purchases, as some expect. The institution’s president, , will give her regular press conference 45 minutes later. She should reiterate that there is little chance the ECB will raise prices for long, even if it reduces its quantitative easing.
European equities again struggled ahead of the decision, with slumping 0.44% and UK edging back more than 1% in a continued negative reaction to the UK government’s announcement of tax increases on Tuesday.
CHECK: Quotation of the main global indices
3. China steps up in the fight against the gaming industry
The Chinese government has taken another blow to its gaming industry, driving down shares of Tencent Holdings (OTC:) and NetEase (NASDAQ:) (SA:) in Hong Kong and the US pre-market session. The South China Morning Post reported that China will suspend the release of new games after a meeting in which authorities issued new demands on the removal of unwanted content and giving up the “lonely profit-seeking” by game companies.
Perhaps sensing an opportunity in the wider Far East region, Sea Ltd (NYSE:) (SA:), the Tencent-backed multi-app company that offers games and other services across Southeast Asia, has said it will raise more than $6 billion.
Already the actions of the alibaba (NYSE:) (SA:) also fell for reports that authorities had blocked the listing of its LinkDoc unit in the US, forcing it to seek another round of private funding elsewhere.
CHECK: Quotation of the main global assets
4. Stocks to extend losses on unemployment insurance claims and Fed on radar
US stocks are likely to extend their losses on growing awareness that the day the Federal Reserve will begin withdrawing its stimulus is approaching, even though comments over the past 24 hours suggest it won’t be at the next Fed meeting in two weeks. .
The chairman of the New York Federal Reserve – one of the Fed’s most peaceful regional presidents this year – said on Wednesday that he still thought a reduction in bond purchases could begin this year, and his Atlanta Fed counterpart echoed these opinions in one on Thursday.
At 8:46 am, the , the and the fell 0.22%, 0.21% and 0.38% respectively.
The big economic indicator of the day in the US will be the weekly number at 9:30 am. Stocks likely to be in focus – in addition to large Chinese ADRs – include Lululemon (NASDAQ:) (SA:), whose second-quarter results and outlook far exceeded expectations as of late Wednesday.
5. Commodities on fire
The backdrop for nervousness about tightening monetary policy is stark, with commodity markets in particular giving signs that price increases caused by the pandemic and subsequent stimulus policies will be larger and longer lasting than previously thought. .
The Chinese rose to an annual rate of 9.5% in August, according to data released overnight, a degree of inflation that is being accentuated by record high freight rates for US ports.
Base metals continued their charge on Thursday, with rising 2.4% to a new seven-year high, while rising 2.5% to a new 13-year high, amid news that air-conditioning makers, which account for about 10% of China’s demand for , are replacing copper with aluminium. Global reference prices for , used in steel production, also reached US$300 a ton.
Henry Hub prices reached $5 per mm Btu for the first time since 2014, with sharp compression in European and Asian markets pushing up liquefied natural gas export prices.
Crude oil prices also rose overnight as the slow restoration of production in the Gulf of Mexico helped keep the spot market tight. The cumulative loss of production since production platforms were shut down before Hurricane Ida is now approaching 20 million barrels.
At around 8:52 am, futures contracts were up 0.65% to $69.75 a barrel, while futures were up 0.69% to $73.10.
CHECK: Quotation of the main global commodities
The US government will publish its weekly at 12:00.