The global financial market opened on Wednesday (14) still adjusting to the impacts of the confirmed resilience of consumer inflation in the United States. The biggest impact was with Asian stocks, which followed the tone of every Tuesday in the financial sector. US futures, however, trade slightly higher, while the European market swings lower at the open.
Yesterday morning, the US Department of Labor released a price change of 0.1% in August. It seems little, but the market’s expectation was for an inflation of 0.1%. Worse than that was the information that core inflation (which excludes energy and food) jumped from 0.3% in July to 0.6% the following month, giving a clear sign that the rise in prices is more widespread.
The impact was immediate and lasted throughout the day: stocks fell, the dollar rose against a basket of currencies and yields on US treasury bonds (Treasuries) advanced, already pricing in a recession ahead.
The almost unanimous assessment of analysts is that at the meeting of the Open Market Committee (FOMC, its acronym in English) on September 20 and 21, the members of the Federal Reserve (Fed, the US central bank) will opt for a new hike in the interest rate by 75 basis points. And the bet for an even more dramatic tightening of 100 basis points has also entered the radar.
Not that there was any doubt about the Fed’s commitment to doing what was necessary to bring inflation down. The official communiqués and interviews of the last two weeks already made this explicit commitment.
But there was still room for disagreement. On Monday, Nobel laureate in economics and former World Bank chief economist Joseph E. Stiglitz signed an article in Project Syndicate with colleague Dean Baker suggesting that the Fed should “wait and see”. They warned of the risk of recession. Now, those voices considered softer (“dovish”) are falling silent. Just yesterday, President Joe Biden declared that “it will take more time and dedication to reduce inflation.”
Featured, today will be released producer price data in the US, while Brazil will have retail sales data. Check out what to look out for:
1. World Scholarships
Today’s session for major US index futures is one of adjustments after Tuesday’s bad mood, with investors pricing in a 0.75 percentage point hike in interest rates next week. And projections of a 1 percentage point increase began to emerge.
Stock indices are up slightly, in a clear adjustment after the worst day for the market of the year. Yesterday, all 30 Dow Jones index stocks and all sectors of the S&P 500 ended the session lower. Nasdaq fell 5.6% and ended its worst day since February, pulled by shares of big tech names like Netflix (-7.8%) and Meta (-9.4%).
See the performance of futures markets:
- Dow Jones Futures (USA), +0.43%
- S&P 500 Futures (US), +0.52%
- Nasdaq Future (US), +0.55%
In Asia, stock markets received more strongly the impact of yesterday’s fall in the United States and Europe, and the consequent appreciation of the dollar against several currencies with the view of a faster rate hike by the Fed to contain inflation. US dollar strength pressured the interest-sensitive Japanese yen to near a 24-year low of 149.96 yen. The Japanese central bank (BoJ) carried out an exchange rate test, which was read as preparation for monetary intervention.
- Shanghai SE (China), -0.80%
- Nikkei (Japan), -2.78%
- Hang Seng Index (Hong Kong), -2.48%
- Kospi (South Korea), -1.56%
European equities also fell at the open on Wednesday, following the worst sell-off on Wall Street since June 2020. The FTSE 100 was bearish, even as UK inflation data for August was less intense than forecast, coming in below 10% in August year over year.
- FTSE 100 (UK), -0.69%
- DAX (Germany), -0.28%
- CAC 40 (France), -0.06%
- FTSE MIB (Italy), +0.70%
In the commodities market, oil prices operate close to stability this morning, also due to the bad reception of the US CPI yesterday. On Tuesday, OPEC said it was seeing “erroneous signals” from the market, as the cartel opposes predictions that slowing economic growth and tightening monetary policy will weigh on global oil demand in 2023.
A barrel of WTI oil was quoted at US$87.52, up 0.24%, while Brent was up 0.23 to US$93.38. Iron ore futures fell 0.69% on the Dalian Stock Exchange to USD 104.02.
- WTI Oil, +0.24, at $87.52 a barrel
- Brent Oil, up 0.23% at $93.38 a barrel
- Iron Ore futures (January 2023) traded on the Dalian Exchange: -0.69% at 720.5 yuan, equivalent to US$104.02 a ton
Bitcoin prices drop 8.74% to $20,387
The producer price index (PPI) for August comes out this Wednesday, with the market still suspicious about the resilience of US inflation. In July, the indicator dropped 0.5% in comparison with June, which led the annualized data to fall from 11.3% to 9.8%. For the data that will be announced today, the Refinitiv consensus projects a deflation of 0.1% in the monthly comparison, which would take the annual increase to 8.8%.
In Brazil, the IBGE releases retail sales in July at 9 am (Brasília time). In case the data surprises positively, as happened with the services survey yesterday, further revisions to GDP projections are expected in 2022. The Refinitiv consensus points to an advance of 0.30% on a monthly basis and a drop of 3.5% on an annual basis.
9:00 am: July retail sales by IBGE, with Refinitiv forecast of monthly rise of 0.30% and annual decline of 3.5%
2:30 pm: Weekly foreign exchange flow
9:30 am: Producer prices in August, with Refinitiv projected to drop 0.1% from July and increase 8.8% year-on-year
11:30 am: : Oil stock
3. Economic news
Consignment of Aid Brazil
Differences over the setting of an interest ceiling delay the regulation of the payroll loan operation to beneficiaries of the Auxílio Brasil program.
The matter has been the subject of daily meetings at the Ministry of Citizenship. Among the technicians, the assessment is that the payroll loan aimed at such a vulnerable population needs a limitation of the interest charged by banks. The technicians’ defense is that the interest limit should be set at least equal to that of the INSS, of 2.14%. The Minister of Citizenship, Ronaldo Vieira Bento, defends internally the establishment of an interest ceiling.
The creation of a payroll loan guaranteed by Auxílio Brasil is a controversial measure, considered by specialists in the social area as a stimulus to the indebtedness of people who already live in conditions of high vulnerability and food insecurity.
Representatives of legal entities, consumer protection and personalities from various sectors even signed a note “In Defense of the Economic Integrity of the Vulnerable Population” asking for the postponement of the payroll.
Budget cuts for Popular Pharmacy ranges from medicines to geriatric diapers
The 60% cut in resources in the 2023 Budget for free medicines from the Popular Pharmacy will restrict the population’s access to 13 different types of active ingredients used in the treatment of diabetes, hypertension and asthma, according to an alert from ProGenéricos, an association which brings together the main laboratories that operate in the production and commercialization in the country.
Six of these drugs are for the control of hypertension: Atenolol, Captopril, Propranolol Hydrochloride, Hydrochlorothiazide, Losartan Potassium and Enalapril Maleate. All Popular Pharmacy products are intended for the treatment of the most prevalent diseases, which, according to the Ministry of Health, are the ones that most affect the population. The copayment list includes adult diapers, medications for osteoporosis, rhinitis, Parkinson’s, glaucoma, dyslipidemia and contraception.
4. Political news
Lula’s strategy in search of useful vote collides with antipetismo
The campaign of ex-president Luiz Inácio Lula da Silva (PT) for the Presidency of the Republic received new impetus with the publication of the latest Ipec/Globo poll, placing the candidate with just over half of the valid votes (51%). the PT winning the presidential race in the first round – and thus avoiding another four weeks of dispute against President Jair Bolsonaro (PL) – made the strategists move towards the so-called useful vote, a phenomenon that, for researchers, was observed in the final stretch of previous claims. But Lula must face the challenge of convincing segments of the electorate, such as those from the middle and upper income classes, with less adherence to the ex-president and in which anti-PT is stronger.
Still in the spotlight, Lula’s vice-presidential candidate, Geraldo Alckmin, denied yesterday that he will command the economy in the event of his slate winning in the elections. The speech came after the press announced that figures within the PT itself were considering this possibility.
Bolsonaro tries to soften speech to reduce rejection
With a strong rejection rate by about half of Brazilians, with variations depending on the poll, President Jair Bolsonaro (PL) started a movement to attract back the voter who repels the PT, but also moved away from Bolsonarism because of the radicalism of its supporters. But the initiative to speak outside the “bubble” often collides with the president’s own speeches. Yesterday, Bolsonaro made an unprecedented mea culpa for minimizing deaths from the pandemic and even promised to hand over the presidential sash if he is defeated. The new costume was half dressed: at the same time, he relapsed into jokes considered prejudiced and left doubts about his behavior after the vote.
5. Corporate Radar
Security Box (CXSE3)
Caixa Seguridade (CXSE3) announced a series of transactions with its French partner, CNP Assurances. The company will sell stakes in different businesses in which it is a partner.
The transaction includes Caixa Seguridade’s stakes in Previsul (48.25%), CNP Consórcio (48.25%), Holding Saúde (48.25%), Odonto Empresas (48.25%) and CNP Cap (24.61 %). The company should receive R$ 667.18 million from CNP Assurances.
“The closing of the transaction is subject to the fulfillment of several conditions precedent stipulated in the Agreement usual for this type of transaction, including the applicable regulatory approvals and the carrying out of the corporate reorganization”, says the relevant fact of Caixa Seguridade.
The IRB (IRBR3) informed that it was sued, in an arbitration procedure, in a demand of R$ 807,430.80 involving the shareholder Everton George dos Santos.
Santos claimed to have bought shares issued by the company between June 9, 2020 and April 20, 2021, and was later surprised by the disclosure, by the IRB itself, of information about the result of internal investigations that would have found irregularities in the payment of supposed bonuses; new versions of financial statements from previous years, with irregularities committed; and disclosure of information considered untrue about the shareholding base.
A request for an injunction to bar the distribution of early dividends by the state-owned company was denied by the Court. The request had been made by the National Association of Petroleum Workers Minority Shareholders of Petrobras (Anapetro) and by Senator Jean Paul Prates (PT-RN).
(with Estadão Content)
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