Bolsa immediately: Ibovespa reverses signal and goes up; Americanas (AMER3) is still in auction, but the theoretical price points to a decline of up to 90%


Outside, Asian markets closed higher on Thursday, following broadly positive indications from global markets during yesterday’s trading session, as investors are optimistic about the upcoming US consumer price inflation report . Additionally, China’s inflation has been in line with expectations, which helps guide growth expectations for the Asian giant in 2023.

European markets and US futures are also enjoying a boost this morning, awaiting inflation data. The report is expected to show a slowing annual rate of growth in consumer prices and could have a significant impact on the interest rate outlook. In Brazil, we follow economic news out of Brasilia as we digest the hole in US stocks, which should reverberate through the retail sector, impacting Ibovespa.


00:44 — A fiscal adjustment and the new framework

In these parts, the economic agenda is at the center of attention, with much anticipation for Haddad’s announcement of the first measures of his ministry. It is understood that today’s package already seeks the promised fiscal adjustment of 2% of GDP (we must, after all, reduce the projected deficit of R$ 220 billion indicated in the Budget).

The main balance will be the recomposition of revenues, with interventions such as the revocation of the reduction of the PIS/Cofin affecting the revenues of large companies and others on fuels. We need to have four interim measures, as well as decrees and ordinances.

The adjustment is important, but secondary to the expectations of a new fiscal framework. As it turns out, one of the strongest propositions within the portfolio comes from the Economic Transition team, which included the participation of Pérsio Arida, André Lara Resende, Guilherme Mello and Nelson Barbosa.

While it has not been disclosed, it is speculated that the new rule that will replace the spending cap will be guided by a spending target, aimed at separating short-term current obligations from long-term investment spending. Will evaluate in the coming months on the curve.

01:38 — Subtle mistake. Who ever?

One issue to worry about will be how the retail sector performs today. The discovery of “accounting inconsistencies” in the order of 20 billion reais will make a lot of noise about Americanas and its own financial sustainability — loans have been identified for purchases which it owes and which are not adequately reflected in the balance sheet (more debt).

The uproar was such that the newly installed president, Sérgio Rial, who according to the market would even solve world hunger at the helm of the company, resigned after 11 days.

The director of Investor Relations, André Covre, also left office with him. Nobody wants the image to be associated with the blunt force. And who can’t make the same move? Reference shareholders: Jorge Paulo Lemann, Marcel Telles and Carlos Alberto Sicupira. The legendary group of businessmen must think hard about a solution to the entire problem; after all, an accounting deficit of R$ 20 billion is paradigmatic. Today we are experiencing those traditional moments of the Brazilian financial market that remain in history, like what happened in Sadia and Aracruz more than 10 years ago.

02:32 — US consumer inflation

Today we have the release of the consumer price index for December, with the market expecting no change during the month. The indicator should rise by 6.5% on an annual basis, slowing down from the 7.1% recorded in November. Meanwhile, basic data, which excludes volatile food and energy prices, is expected to rise 5.7% year-on-year.

The slowdown doesn’t mean the Federal Reserve’s fight against inflation is over, especially if core data rose 0.3% in December (about double the pace consistent with the Fed’s 2% annual inflation target ). It cannot be denied, however, that it has already passed the peak of the inflation peak, which occurred in June 2022 at 9.1% per annum (6.6% in the core).

In any case, Fed officials stressed that they need to see several months of encouraging data before even considering ending their interest rate hike campaign. Another deceleration in inflation in December would mark the third consecutive monthly decline, enough to represent a trend, but interest rates would continue to rise, albeit at a slower pace.

03:28 — European report and Chinese inflation

Today the market is also grappling with the publication of the economic bulletin of the ECB, of the Eurozone, which can count on important expectations for the economy in 2023 of the countries of the region. It’s no secret that sentiment in Europe is not the best, with the continuing war in Ukraine and the energy crisis. It will be important for us to understand how much interest it will take to balance many dishes.

Meanwhile, in China, we had consumer and producer price inflation published, dominated by local concerns (such as food price inflation) and of little global interest. Consumer prices rose by 1.8% in December, up on the 1.6% recorded in November, but in line with expectations. Meanwhile, producers saw a slowdown to 0.7%.

04:07 — When will we see a change in interest rate dynamics

While inflation has recently eased, it is still well above the US central bank’s 2% target. Since we know they will stay on course until the job is done, we should expect more interest in the coming months.

Last month, the Fed even raised its key interest rate to its highest level in 15 years, with some fearing that heightened geopolitical risks or uncontrollable events could repeat itself, causing inflation to pick up again.

The Fed has raised rates seven times in 2022, pushing its benchmark from a range of 0% to 0.25% to the current 4.25% to 4.50%. However, smaller hikes were implemented in December, and officials signaled they plan to continue raising rates to between 5% and 5.5% in 2023 only.

Better prospects are already materializing, with many seeing the Fed continue to hike rates in the first quarter, stop in the second and perhaps cut rates in the fourth.

Slowing demand, price discounts due to high inventories and falling house prices, among other factors, will help moderate inflation, which in turn should prompt major central banks to halt and assess its recent historical series of interest rate increases.

As supply chains recover and labor markets experience less friction, we could see a steeper and broader fall in inflation, implying a slightly easier path to policy and higher global growth.

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