Stock market heads to worst quarter since the beginning of the pandemic

PEC Kamikaze worsens context for investments already harmed by global crisis

Brazil’s stock market is expected to close June with the biggest quarterly drop since the beginning of the Covid-19 pandemic. The fall accompanies the decline abroad, but is also exacerbated by the domestic political scenario, with President Jair Bolsonaro (PL) seeking to improve his chances of reelection through increased public spending.

Under discussion in Congress, the PEC (Proposed Constitutional Amendment) 1, dubbed PEC Kamikaze, provides for the release of federal government spending and the creation of new social benefits. This type of measure is feared by investors in an election year as it increases the risk of harm to the future execution of the Budget. This is what the market usually calls fiscal risk.

At 11:39 am this Thursday (30), the benchmark indicator of the Brazilian Stock Exchange fell 1.69%, to 97,932 points. If it ends the session at this level, the Ibovespa will fall by about 18% at the end of the second quarter of 2022. This would lead the index to its worst result since the 36.86% plunge recorded at the end of the first quarter of 2020.

Dollar may have biggest monthly rise since March 2020

The spot commercial dollar was traded with an appreciation of 0.90%, quoted at R$ 5.2370 on sale. The US currency could see the biggest monthly gain since March 2020.

The jump in June this year is expected to be almost 9%, while the increase in the month marked by the beginning of the pandemic was 16%, according to preliminary calculations by the Reuters agency.

Despite the damage caused by the Brazilian electoral dispute to investments in the stock exchange, the international context is primarily responsible for the generalized fall in the stock market and the strengthening of the dollar.

In the United States, the S&P 500 is also expected to end the quarter with a fall of close to 18% and, like the Ibovespa, the main index of the New York Stock Exchange will have its worst result since the 20% drop at the beginning of the pandemic.

To face the highest inflation in four decades, the Fed (Federal Reserve, the American central bank) has been accelerating the escalation of interest in the country, increasing fears that this credit crunch could cause recession in the country, harming the entire world economy.

Antônio Sanches, an analyst at Rico Investimentos, says that the market is attentive this Thursday to the reaction to the final reading of the GDP result for the first quarter of the United States, whose slight downward movement, in relation to the previous reading, already raises more fears about a recession ahead.

In Brazil, according to Sanches, the attempt to change the constitution to increase government spending by almost R$40 billion this year, all outside the spending ceiling, will focus attention.

“In summary, another day of volatility marked by aversion to international risk, and by a domestic scenario marked by short-term gains with greater stimulus to the economy, on the one hand, and increased fiscal risk, on the other,” commented the analyst. .

The day before, the Ibovespa maintained the negative trend observed the day before and marked a 0.96% devaluation, at 99,621 points. The domestic index was pressured by the drops in the shares of large banks and Vale and Petrobras.

Source: Leaf