Futures in New York and European markets rose on Monday morning after a week of losses, as investors bet that the Federal Reserve (Fed) will tighten monetary policy aggressively to fight rising inflation.
Investors have faced fears that the Fed could raise interest rates too fast and too much, causing a recession.
Markets will be focused on reading the consumer price index for May, which is scheduled to be released on Friday morning. The main inflation indicator is expected to be only slightly weaker than April, which could be interpreted by some as confirmation that inflation has peaked.
Meanwhile, Asian stocks mostly closed higher on Monday. Featured are data from China and news that Chinese regulators are preparing to close investigations into Didi Global Inc. In addition, attention was drawn to a further relaxation of restrictions in Beijing for most of the city on Monday, raising expectations for a recovery in the economy.
In Brazil, during the week, the IPCA and IGP-DI are highlighted on the agenda, while, in Brasília, the discussion will continue focused on the proposal to reduce ICMS in the fuel, energy, telecommunications and public transport sectors. PLP 18/22 was approved in the Chamber and is currently being processed in the Senate. Furthermore, it will be important to closely follow the discussion on fuel prices and possible subsidies.
On the corporate side, the meeting of Furnas debenture holders scheduled for this Monday (6th) was suspended by a decision of the Court of Justice of the State of Rio de Janeiro (TJ-RJ). The judge on the judicial duty, Isabel Teresa Pinto Coelho Diniz, last Sunday granted an urgent provisional injunction in response to a request from the Furnas Employees Association (Asef), in an action that pointed to a series of alleged irregularities committed by the company. The legal dispute may affect the public offering of Eletrobras shares (ELET3;ELET6), which aims to privatize the state-owned company.
Check out more highlights:
1. World Scholarships
US futures indexes operate higher this morning on Monday (6) recovering from a weekly decline.
On Friday, a solid jobs report dampened hopes of a pause in the Federal Reserve’s aggressive monetary policy tightening needed to cool the highest inflation in decades. The Department of Labor report from United States showed that payrolls outside the agricultural sector increased by 390 thousand last month and wages rose while the unemployment rate remained at 3.6%. All indicators signal a tight job market.
See the performance of futures markets:
- Dow Jones Futures (USA), +0.84%
- S&P 500 Futures (US), +1.13%
- Nasdaq Future (US), +1.49%
Asian markets were mostly up. Private research showed that Chinese services activity recovered, albeit contracting in May.
China’s Caixin Services Purchasing Managers’ Index, released on Monday, came in at 41.4, better than the April reading of 36.2 but still in contraction territory. The composite index advanced from 37.2 in April to 42.2 in May.
Risk appetite also rises with the easing of tough restrictions to contain Covid-19; attention to Beijing’s further relaxation of restrictions for most of the city on Monday, raising expectations for a recovery in the economy.
Also in the spotlight, the Wall Street Journal reports that Chinese regulators are preparing to close their investigation into Didi Global Inc. With that, even this week, the company could add users to its customer base again.
In other geopolitical developments, US Secretary of Commerce Gina Raimondo told CNN that President Joe Biden’s administration is “looking into” the possibility of lifting some tariffs on China to fight inflation.
- Shanghai SE (China), +1.28%
- Nikkei (Japan), +0.56%
- Hang Seng Index (Hong Kong), +2.71%
- Kospi (South Korea), closed for public holidays
European markets rose on Monday as international markets braced for the release of US data, including the latest inflation reading.
Attention in Britain on Monday will turn to domestic politics, with Prime Minister Boris Johnson facing a vote of confidence from members of his Conservative party amid growing dissatisfaction with his leadership.
- FTSE 100 (UK), +1.19%
- DAX (Germany), +0.98%
- CAC 40 (France), +1.17%
- FTSE MIB (Italy), +1.52%
Crude oil prices operate slightly higher this week, with Brent rising above $120 a barrel after Saudi Arabia raised prices for its oil sales in July, signaling tight supply even after OPEC+ agreed to accelerate production increases over the next two months.
- WTI Oil, +0.82%, at $119.84 a barrel
- Brent Oil, +0.80%, at $120.70 a barrel
- Iron ore traded on the Dalian Exchange rose 0.65% to 925.00 yuan, equivalent to US$139.21
- Bitcoin, +5.82% at $31,414.62 (from 24 hours ago)
This is another week in which inflation data promise to set the tone for business in the financial market, especially the Consumer Price Index (IPCA) for the month of May.
The indicator will be released on Thursday (9) by the IBGE and, according to Bradesco’s projections, it should present a rise of 0.58% compared to April. “Despite the downward impact of the green tariff flag on electricity prices, the cores should remain under pressure in all metrics”, points out the bank.
Before that, the May IGP-DI will be released on Wednesday. “We expect a monthly increase of 0.70%, taking the annual rate to 10.6% from 13.5% in April. The reading will be pressured by the agricultural wholesale, while fuel prices may decelerate”, evaluates Itaú.
This Monday (6), the Central Bank will make a “partial update” of the Focus Survey at 8:30 am.
According to the BC, the information will be released through a press release, with a partial of the market projections made until Friday (3).
Outside, on Wednesday (8), there is the GDP of the euro zone, a region that will have a busy week. The European Central Bank announces on Thursday (9) its decision on interest rates.
In the US, investors will be focused on reading the consumer price index for May, which is scheduled to be released on Friday morning (10).
8:00 am: Paulo Guedes, Minister of Economy, attends BRICS meeting
8:25 am: Partial Focus Bulletin
9:00 am: Roberto Campos Neto, president of the Central Bank, gives a lecture at the Valor’s Crypto Summit Rio 2022 event
12:30 pm: Campos Neto has lunch with Cliff Sobel, from Valor Capital Group
3pm: Weekly trade balance
6:00 pm: Guedes participates in a meeting of the Investment Partnership Program Council (CPPI)
3. ICMS ceiling PL
Senator Fernando Bezerra (MDB-PE) told Broadcast that he is working to complete by Tuesday (7th) the report on the project that imposes a 17% cap on the ICMS tax rate on fuel, energy and other services. Tomorrow, he will meet with Senate President Rodrigo Pacheco (PSD-MG) and Paulo Guedes to discuss the matter. Pacheco, says Bezerra, wants the report to be appreciated before June 14th. In the Chamber, the expectation is that the deputies advance in the analysis of the project that provides for the full return of tax credits improperly charged from consumers in energy tariffs. The bill has already been approved by the Senate.
Spending and inflation
The column by Lauro Jardim/O Globo says that so far Paulo Guedes has managed to convince Jair Bolsonaro not to increase spending to lower fuel prices and give a 5% readjustment to federal servants. It is Bolsonaro’s desire, who wants reelection, and Centrão’s demand. Guedes has insisted that these measures would raise inflation and drive the dollar higher. “It would blow everything up,” he told Bolsonaro. According to Jardim, a minister close to the president believes that the impression of everyone around him is that he is afraid to confront and antagonize the minister. But despite that fear, the urgency of the election may speak louder now. Centrão wants a decision for the next few days.
Tarcísio intends to revoke taxes in SP
Pre-candidate for governor of São Paulo, former Minister of Infrastructure Tarcísio de Freitas (Republicans) is considering revoking taxes that were raised last year, during the João Doria (PSDB) administration. “We are already doing the math to get back to the situation we had before 2019,” he said in an interview with Valor.
Last Sunday (5), Brazil recorded 12 deaths and 4,591 cases of covid-19 in 24 hours, according to information from the consortium of press vehicles, at 8 pm.
The moving average of Covid deaths in 7 days in Brazil stood at 80, down 17% compared to the level of 14 days earlier.
The moving average of new cases in seven days was 29,342, which represents an increase of 103% compared to the level of 14 days before.
The number of people fully immunized against Covid in Brazil reached 166,344,538, equivalent to 77.43% of the population.
The number of people who took at least the first dose of vaccines reached 178,578,775 people, which represents 83.13% of the population.
The booster dose was given to 93,629,821 people, or 43.58% of the population.
5. Corporate Radar
The meeting of Furnas debenture holders scheduled for this Monday was suspended by a decision of the Court of Justice of the State of Rio de Janeiro (TJ-RJ). The judge on the judicial duty, Isabel Teresa Pinto Coelho Diniz, granted this Sunday, 5, an urgent provisional injunction in response to a request from the Furnas Employees Association (Asef), in an action that pointed to a series of alleged irregularities committed by the company. Among them would be the breach of the debenture contract and the violation of rules on deadlines.
The decision mentions the right to exercise the vote by the debenture holder and that the contribution “of R$ 681,446,626.81, without approval by the General Meeting of Debenture Holders” could “come to characterize the termination of the debenture agreement”. The legal dispute may affect the public offering of Eletrobras shares (ELET3;ELET6), which aims to privatize the state-owned company.
PetroRecôncavo (RECV3) announced that it will make a restricted offering of shares, which can turn up to R$ 2.171 billion, at the price of the last trading session, last Friday (3), of R$ 27.42. The share price in the primary offering (new shares) will be defined after the bookbuilding, from June 6th to 14th. According to the material fact disclosed by the company, the funds will be used to finance potential acquisitions, such as Polo Bahia Terra, and to strengthen cash.
Petrobras (PETR3; PETR4) released this Friday (3) the teaser regarding the sale of its entire 18.80% stake in the company UEG Araucária, located in the state of Paraná.
UEGA is a partnership between Copel (CPLE6) and Petrobras, consisting of a natural gas thermoelectric plant (combined cycle, with two gas turbines and a steam turbine) and located in Araucária – PR, close to the Bolivia- Brazil (GASBOL). It started operating in 2002 and has a total installed capacity of 484 MW.
(With Estadão, Reuters and Agência Brasil)
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