After positive May, prospects remain optimistic for Ibovespa and dollar in June

May established itself as a month of recovery for Brazilian risk assets and also for the real – the Ibovespa closed the month up 3.22%, at 111,351 points, and the commercial dollar fell 3.85% against the Brazilian currency , traded at R$4,752. The advance came after some news, mainly from abroad, dissipated the pessimism of investors. For June, the outlook is for the world scenario to continue to be positive, with the greatest risks for Brazilian stocks being local.

In general, the perspective of some analysts is that the sixth month of the year will be calmer, precisely due to the fact that many of the reasons that were weighing against the performance of the world’s stock markets.

In the United States, Fed directors said in the last week of May that the next two hikes in the official US interest rate should not exceed 50 basis points. With that, they minimized the fear of an acceleration of monetary tightening – which is seen as negative for risky assets.

“A good part of risky assets has already dropped a lot and are at very low levels, where there is no longer much room for them to retreat, only if recession expectations take hold”, comments Kaue Franklin, equity specialist at Aplix Investimentos. “On the other hand, we have an alignment in relation to inflation and interest expectations, making the markets have more risk appetite”.

Still on this front, some American indicators have shown that the world’s largest economy may be slowing down, but not retreating yet. April’s PCE, the main US inflation index, was 0.2%, within consensus and lower than the 0.9% in March. Gross Domestic Product (GDP), released last week, dropped 1.5% in the first quarter, more than the 1.3% expected, but still small after a strong growth of 6.9% in the last quarter of 2021.

“US GDP retracted and inflation readings came in weaker than expected. This brings a more positive outlook to risk assets”, says Caio Tonet, founding partner and head of equity at W1 Capital.

Despite being counter-intuitive, at the moment the world finds itself, the fact that the US GDP performance is worse than expected ends up being positive for the capital market. Very heated economies lead, with people consuming and buying, to price increases that give rise to stronger monetary tightening.

According to Tonet, the market will keep an eye on these indicators during the month of June, which should weigh in the next decisions of the Federal Reserve.

In addition to the United States, China should also bring more stability

China was also, between April and May, the result of uncertainties for investors that are now, in principle, also decreasing.

In Shanghai, one of the country’s main cities, the lockdown imposed by the Covid zero policy was terminated on June 1 after two months of closure.

Restrictions on circulation in the Asian giant directly impact the international market, as the entire production chain breaks down. In addition, there are also direct and significant effects on the Brazilian economy, given that China is the biggest trading partner and biggest buyer of national commodities.

On this last front, of commodities, specialists show some optimism, since China must, in order to contain the impacts of lockdownsstill bring new economic stimuli.

“The basic materials sector will depend on the measures that are released in support of the Chinese economy and also on performance data”, defends Luiz Adriano Martinez, portfolio manager at Kilima Asset. “We think it will be positive, at least in the short term, with the economy picking up with the new announcements.”

On Monday, the Communist Party of China announced 33 measures covering fiscal, financial, investment and industrial policies to revive its economy. According to a Bloomberg survey, the government can inject up to US$ 5.5 trillion into the local economy.

“For the month of June, our scenario continues with a positive bias for the Brazilian stock market, due to the continued rise in commodity prices, mainly in the iron ore sector, with the improvement of the Chinese economic scenario due to the easing of restrictions to combat the Covid-19”, says Matheus Pizzani, economist at CM Capital.

In Brazil, uncertainties increase

If on the international scene there are fewer “clouds” along the way, in Brazil managers point out that the trend may be the opposite.

As the elections approach, investors are starting to pay more attention to what the main candidates are saying – and the statements, so far, are not favorable to a good performance of the capital market.

“The electoral cycle should start to enter prices in the coming weeks”, points out Martinez.

The two main candidates for the presidency of the Republic have been making statements that weigh on the performance of the Ibovespa.

The current president, Jair Bolsonaro, just yesterday declared that Petrobras (PETR3;PETR4 “cannot continue using international price parity” and criticized shareholders. Also on Tuesday, former president Lula, currently ranked first in the polls, defended “Brazilianizing” the fuel prices and criticized the oil company’s “billion dollar dividends”.

As a result, Petrobras shares, which correspond to about 12% of the Ibovespa, have not moved recently, despite the fact that the price of oil has advanced.

Analysts still say that the oil company is not the only one that starts to feel the weight of the elections. Other state-owned companies, such as Banco do Brasil (BBAS3), should also be impacted. Even out of the spotlight and the controversies – which are currently under the fuel prices – the change of government tends to bring discontinuity to the management of these companies.

Gustavo Akamine, analyst at Constância Investimentos, also highlighted that the market should closely monitor the discussion of the Complementary Law Project (PLP) 18, which limits the collection of ICMS on energy, fuel, telecommunications and public transport. “The discussion can greatly influence inflation, government bonds and the stock market itself”, he explains.

Dollar less volatile?

If there are no major surprises on the international front, the prospect is that the dollar will also register less volatility in June.

“The expectation is that the improvement of the stock market, if implemented, will maintain the flow of dollars towards the country via foreign investment, strengthening the current position”, explains Pizzani. “In the commercial field, the maintenance of commodity prices at high levels tends to benefit the performance of the trade balance, which should continue to show a surplus even in the midst of a period in which the country does not show such a robust performance seasonally”.

In the scenario, fiscal political threats can also generate some weakening of the real – lowering the ICMS, in the long run, is seen as a threat to fiscal health, unless there are counterpoints with spending cuts.

When the subject is interference in state-owned companies, the dollar, if there is a measure such as interference in Petrobras’ price policy, also tends to advance.

The American currency, for comparison purposes, when former Petrobras president Roberto Castello Branco was fired in February last year, advanced more than 1.5% over the real. Changes in the direction and way of governing the company are seen as legal insecurities.

Finally, when it comes to intervention in fuel prices, there are still, at the end of the day, impacts on the government’s fiscal situation – which either subsidizes the product or, at least, stops billing.

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