Since the beginning of trading on Monday Ibovespa Adopt a more passive movement. Growing global risk aversion has affected stock markets around the world and Ibovespa is no different. After oscillating between 158,029 points and 159,224 points, the index ended with a decline of 0.29%, at 158,611 points, losing the closing level of 159,000 that it reached on Friday, in the session of the decline of the leading stocks from the banks.
The reading of the Bank of Japan (BoJ) indicating possible monetary tightening in December led to an increase in future domestic interest rates, which had a negative impact on domestic stocks. C&A Modas and CVC were among the biggest losers, with losses of 4.28% and 3.72% in that order. The largest decline was in the value of MBRF shares, which fell by 5.02%, continuing the most negative movement in recent days.
Ibovespa’s decline was not more significant because Vale shares helped contain losses, along with a rise in Petrobras shares. At the end of the day, the ON mining company’s index rose 0.77%, extending its gains for the second session in a row. The oil company’s shares closed up 0.19%. But during some moments of the trading session, the oil company’s common shares rose while the state-owned company’s preferred shares fell, which may indicate that the stock was bought by foreign investors.
The state-owned company’s shares were supported by the decision of members of the Organization of the Petroleum Exporting Countries and its allies (OPEC+) to maintain stable production, while investors monitor geopolitical tensions in Eastern Europe and Venezuela.
Although investors remain confident of a US interest rate cut next week, caution clouded the trading session on Monday. One manager commented that risk aversion was increasing amid deteriorating global ‘financing’ perception (cost and availability of capital), which had put pressure on Treasury yields and therefore domestic interest rates.
Although the movement was negative in the trading session, UBS BB’s Associate Director of Global Markets for Latin America, Marcelo Okura, stated that the house maintains a cautiously optimistic stance with the stock market in Brazil, given the weakness of the dollar abroad and the continued monetary easing cycle by the Federal Reserve. This move tends to benefit emerging markets, and therefore Brazilian stocks, summing up executive power.
Overseas, Okura says corporate results have been positive, and there is no evidence of a technology bubble yet.
Itaú BBA maintains its recommendation above the market average (overweight) for Brazil, after a fruitful promotional campaign in Europe. The House justifies the decision because of the bearish Sellick cycle, which tends to benefit large-capitalized domestic stocks, which are more sensitive to interest rates and less dependent on the pace of economic activity.
The team led by Itaú BBA’s chief strategist, Daniel Goehr, highlights that Brazil appears to be slightly overweight among European emerging market investors, with growing debate over domestic monetary policy and the Fed’s cycle, both of which are seen as positive for the country. The expectation of extraordinary profits was also a recurring topic in the meetings, analysts add in a report.
“The financial sector remains the most favored, with greater interest in other quality local cyclical names: transportation, real estate and selective consumption. In addition, infrastructure (sanitation, electricity, concessions) has also attracted interest,” they point out.