© Reuters. Fed chairman’s ‘hawkish’ tone limits Ibovespa rise to 0.98%
The unsurprising outcome of the long-awaited first meeting of the (Fed, the US central bank) in a year in which interest rate hikes and stimulus withdrawal are expected was initially greeted with relief by global investors, adding a little more fuel to the recovery, which was already taking place in January even on the most negative days in New York.
In the afternoon, the benchmark of B3 (SA:) reached the peak of the day at 112,694.60 points (+2.26%) minutes after the Fed’s statement, but then lost strength, even before the start of the press conference of the chairman of the American BC, Jerome Powell – who ended up putting the NY indices in negative at the close, with the exception of (+0.02%), with losses between 0.15% () and 0.38% ().
The “highly uncertain” scenario, which requires adaptation and compliant responses, mentioned by Powell in the final part of the interview, took Wall Street from good gains in the session to losses that reached 1% at the worst moment. “There is a risk that inflation may be more persistent than expected”, acknowledged the Fed chairman, in part of the interview read by the market as much more “hawkish” than the preamble, also trimming the recovery of the Ibovespa.
At Wednesday’s intraday high, the B3 index was at its highest level since last October 19, when it left the opening at 114,400 points. In the end, it showed a rise of 0.98%, to 111,289.18 points, now at the best closing level since October 18 (114,428.18 points), leaving this opening Wednesday at 110,206.50, almost equivalent to the low of the day. , of 110,204.45 points. For the week, gains are now at 2.15%, while those for the month are at 6.17%. Reinforced, the turnover was R$ 40.2 billion in the session.
The Fed’s monetary policy committee indicated on Wednesday that it intends to start reducing the balance of assets after the start of the cycle of hikes in basic rates. In a statement, it said the reduction will occur over time, “in a predictable manner”, primarily by adjusting the reinvested amounts of payments received from assets held in the System’s Open Market Account (Soma).
“The statement released after the meeting reinforced the view that the first increase in prices should occur at the next meeting (in March), in a probable increase of 0.25pp, in addition to the end of the asset purchase program in early March”, he says. Paula Zogbi, analyst at Rico Investimentos.
“Everything came as planned, with interest rate hikes starting in March, as the market had already been pricing. 2022 or beyond”, says Camila Abdelmalack, chief economist at Veedha Investimentos, also calling attention to the conduct of the institution’s balance sheet reduction process, on how it will be done.
At the press conference after Wednesday’s decision, Powell initially pointed out that it was not possible to highlight the pace of interest rate hikes now, noting that the Fed, once again, will be guided by the data. “We will be ready to adjust the balance sheet according to circumstances,” the Fed chairman also said, somewhat evasively.
On the other hand, he reiterated the Central Bank’s commitment not to allow inflation to take root. “In due course, we will provide more information on the balance sheet reduction,” added Powell, also noting that the “interest will be adjusted with appropriate communication” and that “we will have at least two more meetings to discuss balance sheet reduction”, in a tone “dovish” to the liking of the market.
However, the lack of a very clear guideline contributed for the three stock indices in New York to wither during the interview with the Fed chairman, which led the Ibovespa to return more than half of the enthusiasm seen shortly after this Wednesday. The final part of Powell’s interview was read by the market in a very ‘hawkish’ tone, especially when he referred to strong inflation in the United States and pending uncertainties in the scenario, which require adaptability from the Federal Reserve.
In itself, “the Fed’s decision was in line with market expectations. It opted to maintain interest rates and reiterated the sign that the interest rate hike cycle begins in March, with the commitment that it will act in an appropriate and predictable manner, which had little effect on the exchange rate during the regular session”, says Cristiane Quartarolli, economist at Banco Ourinvest. This Wednesday, the spot closed in a slight increase of 0.11%, at R$ 5.4411.
Afterwards, “the Fed chairman’s statements were harsher and the market turned around”, observes the economist, highlighting the reference made by Powell to the effect that “price pressure may be more persistent”. “With that, the market understands that the high interest rates there may be more intense. Therefore, the turn in the behavior of the dollar now”, adds Quartarolli.
In Brazil, the market also remains attentive to the behavior of inflation, especially due to the weighting between fixed and variable income raised by the process, still in progress, of raising the Selic rate – this Wednesday it was the turn to know, in the morning, the IPCA-15 referring to to January, to 0.58%, compared to 0.78% in December.
“The IPCA-15 is a great approximation for the closing of the month. In January, there was a deceleration, but it came above what the market expected. ‘We have still growing inflation, but at lower rates, month by month. declines ahead, if the BC’s ‘hawkish’ policy takes effect here, as it is expected to do in the coming months”, says Davi Lelis, partner at Valor Investimentos.
At the top of the Ibovespa this Wednesday, we highlight Grupo Soma (SA:) (+9.76%), Petz (SA:) (+7.33%) and Méliuz (SA:) (+6.91%) . On the opposite side, Braskem (SA:) (-4.17%), Americanas ON (-3.51%) and JBS (SA:) (-3.13%). Among the blue chips, with the traded this Wednesday at US$ 90 per barrel, Petrobras ON (SA:) and PN rose 2.93% and 2.67%, respectively, with Vale ON (SA:) up 0 .29% at closing. Banks responded well to the prospect of higher interest rates and withdrawal of stimulus in the US, lining up mostly higher after the Fed, with the exception of BB (SA:) ON (-0.96%) among the big banks.