Stock markets rally ahead of US inflation data; Lula’s government sues STF after detecting threat of coup acts

With the indicator’s weak schedule on Wednesday (11), investors are preparing for the release of the consumer price index (CPI, its acronym in English) for December in the US tomorrow.

Fed Chair Jerome Powell said on Tuesday that restoring price stability with high inflation could require unpopular measures.

The speech did not provide direct clues about the direction of monetary policy from a central bank that has raised interest rates seven times in the past and indicated that further hikes are likely this year. But the expectation is that the Fed will raise interest rates by a smaller amount at its February meeting.

Against this backdrop, global markets are starting to rally, with US and European stock futures indices trading slightly higher, while Asian stocks finished mostly higher.

Here come November retail sales, with the Refinitiv consensus expecting a 0.3% decline from October, but a 1.9% increase from November 2021.

Political news is also dense. In Brasilia, the Lula government yesterday activated the Federal Supreme Court (STF), after identifying calls to protest this Wednesday in all capitals circulating on Telegram. The AGU has asked Minister Alexandre de Moraes to take all appropriate measures to prevent new encroachments on public buildings and the obstruction of highways.

1. World Scholarships

WE

After the Nasdaq closed higher for the third time in a row, US index futures were trading higher this morning as investors await a major inflation report on Thursday and the results of major US banks on Friday.

The CPI is an important indicator of whether the measures taken by the US Central Bank to contain inflation are on track.

See how the futures markets performed:

• Dow Jones Futures (US), +0.10%
• S&P 500 Futures (US), +0.06%
• Nasdaq Futures (US), +0.03%

Asia

Asian markets closed higher, except for China’s Shanghai index, with investors anticipating the US consumer price index, which will help the Federal Reserve decide the direction of interest rates in the country.

According to indicators, the consumer price index in Australia rose by 7.3% in November compared to the previous year, a sign that inflationary pressures have not yet eased.

South Korea’s unemployment rate rose to 3.3% in December, marking an 11-month high.

• Shanghai SE (China), -0.24%
• Nikkei (Japan), +1.03%
• Hang Seng Index (Hong Kong), +0.49%
• Kospi (South Korea), +0.35%

Europe

European markets are trading higher as investors brace for more inflation data, with US consumer price data due tomorrow (12).

As far as European monetary policy is concerned, according to the policy maker of the European Central Bank, Robert Holzmann, during the Euromoney conference, interest rates will have to increase significantly even more to reach sufficiently restrictive levels to guarantee an appropriate return of inflation to the target medium term by 2%.

• FTSE 100 (UK), +0.37%
• DAX (Germany), +0.30%
• CAC 40 (France), +0.29%
• FTSE MIB (Italy), +0.10%

Goods

Oil prices rose in today’s session, extending gains from the day before, as fuel demand is expected to grow in China, the world’s second largest oil consumer, as it eases Covid restrictions and resumes international travel.

Iron ore prices in China are also trading at a high level, reflecting the easing of Covid restrictions in the country, despite concerns over rising contamination numbers.

• WTI crude oil, +0.36%, to 75.39 dollars a barrel
• Brent, +0.36%, at 80.39 dollars a barrel
• Iron ore traded on the Dalian Stock Exchange rose 1.62% to 847.50 yuan, or $125.18

bitcoins

• Bitcoin, -0.08% to $17,446.40 (24 hours ago)

2. Schedule

The IBGE will today release Monthly Survey of Commerce (PMC) data for November, the well-known retail sales, which are expected to reflect sales patterns during Black Friday, Bradesco assesses.

The Refinitiv consensus expects a 0.3% drop compared to October, but a 1.9% increase compared to the same month in 2021.

Brazil

9: Retail sales, with Refinitiv consensus forecast down 0.3% since October and up 1.9% year over year

2.30pm: Weekly FX stream

United States of America

12:30: Weekly oil inventories – GO

China

10.30pm: Consumer price index

10.30pm: Producer price index

3. Economic news

High inflation in 2021 and 2022 above target was a global phenomenon, says BC

In an open letter to Finance Minister Fernando Haddad to justify the failure to meet the 2022 inflation target, the president of the Central Bank, Roberto Campos Neto, argued that exceeding the target was a “global phenomenon”, citing the impacts of the war in Ukraine on raw material prices and industrial goods, also considering the effect of the zero covid policy in China.

“Pressures from commodity prices and global supply chains have reflected changes in consumption patterns caused by the pandemic, with a proportionately greater share of demand directed to goods and driven by expansionary policies, and, in the case of 2022, have been aggravated by the outbreak of war in Ukraine”.

Campos Neto also acknowledged that inflation in 2023 is expected to remain above the set target (4.75%) considering his conditional projection of 5.0% for this year. But, considering the projections for 2024 (3.0%) and 2025 (2.8%), the Central Bank maintains that the “scenario is that of the convergence of inflation to its targets”.

4. Political news

Lula’s government sues STF after identifying threats of extremist acts

The Lula government called the STF yesterday after noting the threat that extremist groups are calling for new coup protests this Wednesday, according to the newspaper O Globo e Estadão.

The “National Mega Demonstration for the Resumption of Power” is expected to take place in all capitals, including the Esplanada dos Ministérios, in Brasilia, the scene of terrorist attacks that led to the looting of the Congress, the Planalto Palace and the headquarters of the STF.

According to the Advocacy-General of the Union (AGU), calls for protests against the coup circulated mostly on Telegram. The AGU requests Minister Alexandre de Moraes that all authorities take adequate measures to prevent the invasion of public buildings and the obstruction of urban roads or highways.

Bolsonaro leaves Orlando hospital

Former President Jair Bolsonaro left the hospital where he was being treated on the outskirts of Orlando, US, on Tuesday with an intestinal obstruction, a day after saying he would speed up his return to Brazil.

According to a source close to the Bolsonaro family heard by Reuters, the former president has chosen to leave the US hospital because he does not want to entrust his treatment to doctors he does not know. “She wants people he trusts around,” the source said.

Columnist Lauro Jardim, of the newspaper O Globo, said that Bolsonaro would have decided to leave the hospital contrary to medical recommendations. Jardim was the first to announce Bolsonaro’s medical resignation.

Covid

Brazil recorded 82 covid-19 deaths in the past 24 hours on Tuesday, for a total of 695,031 since the start of the pandemic.

With that, the rolling average of deaths over the past 7 days is 114. Compared to the average 14 days ago, the change was -34%.

In total, the country recorded 44,739 new Covid-19 diagnoses in 24 hours, completing 36,560,497 known cases since the start of the pandemic.

PetroReconcave (RECV3)

PetroRecôncavo’s average daily production (RECV3) reached 23,072 barrels of oil equivalent in the fourth quarter of 2022, an increase of 4.7% compared to the third quarter of 2022.

The company’s production was 24,405 boe per day in December, up 0.9% from its November production.

Oil 3R (RRRP3)

3R Petroleum reported preliminary, unaudited production data for the month of December 2022 on Tuesday.

The company’s average daily production reached 25,336 barrels of oil equivalent in December 2022, up 92.3% from November’s production.

(With Estadão, Reuters and Agência Brasil)

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