Greenback loses energy in market adjustment to threat of recession
- September 28, 2022
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Currency soared the day before and real had the worst performance among major currencies
The dollar fell against most global currencies and the Stock Exchanges were rehearsing a recovery on Tuesday (27), a combination that shows the market trying to rebalance itself after the turmoil generated the day before by fears of a serious slowdown in the global economy. .
In Brazil, at 11:25 am, the commercial dollar dropped 0.26%, quoted at R$ 5.2620. On the local Stock Exchange, the Ibovespa parameter index rose 0.25%, to 109,395 points.
Domestic investors digested the release of a lower-than-expected IPCA-15 (official inflation preview) for September and, on the other hand, a minutes from the Central Bank’s monetary policy meeting indicating that the basic interest rate could be maintained. at the high level of 13.75% for a long period.
Abroad, the pound sterling recovered some of its value against the dollar and was worth US$ 1.0750, after having fallen to the lowest price since 1985.
On the New York Stock Exchange, the benchmark S&P 500 index rose 0.70%, which was also the growth rate of the Dow Jones, an indicator that tracks the shares of 30 of the largest companies in the country.
The slight recovery of the Dow Jones comes after the index hit the so-called “bear market”, the bear market, in reference to the animal whose paw knocks down what is ahead. The term is used to define an annual stock drop above 20%.
When stocks go up, however, the reference animal is the bull, which throws everything it attacks into the air. It’s the bull market.
The dollar soared against the real this Monday (26) and closed up 2.43%, quoted at R$ 5.3760 on sale. This was the biggest rise in the US currency in two months.
At the peak of this session, it rose more than 3%, to R$ 5.4170. As a result, the real had the worst performance among the main global currencies.
The exchange rate once again reflected the unfavorable global environment for the growth of companies and, consequently, a greater risk of devaluation for the shares traded on the Stock Exchanges.
It is a time when the market prefers to take dollars from riskier investments to seek protection in US Treasury bonds, which, in addition to insurance, are even more attractive in view of the prospect of continuing interest rate increases in the country. The move makes the US currency scarcer and more expensive in other parts of the world.
Last week, the Fed (Federal Reserve, the US central bank) confirmed the third straight rise of 0.75 percentage point in the cost of credit, showing no signs that the battle against inflation is nearing an end.
Investors were even more pessimistic after the UK announced late last week a plan that could further accelerate inflation in the region, threatening the global effort to rein in global price increases.
In the early hours of Monday, the pound sterling fell to the lowest level in history against the dollar, in reaction to the biggest tax cut package in 50 years, announced by the new UK finance minister, Kwasi Kwarteng. At the end of the day, the British currency closed at US$ 1.0681, renewing its lowest value since 1985.
Kwarteng is borrowing billions of pounds to finance the plan, which could heat up the economy as the Bank of England raises interest rates to rein in inflation.
This is an especially bad time to announce a spending increase package, as the whole world tries to count the process of global inflation.
This Monday, the British government’s spending package was criticized by the American monetary authority. Raphael Bostic, chairman of the Atlanta Fed, said that “the reaction [do mercado] to the proposed plan [pelo Reino Unido] is a real concern.”
“The key question will be what this means for the weakened European economy, which is an important consideration for the performance of the US economy,” commented Bostic.
In the stock market, the Brazilian Ibovespa index dropped 2.33%, to 109,114 points, and had one of the worst performances among the main Stock Exchanges.
Despite this, Ibovespa accumulates gains of around 4% this year, while most markets fall in 2022.
In the United States, the parameter indicator for the New York Stock Exchange fell by 1.03%. As a result of this session, the S&P 500 is down 23.31% this year.