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The month of April has been particularly difficult for the Ibovespa, the main stock index on the Brazilian stock exchange. On April 1, the index closed the trading session up 1.31%, at 121,570 points. Since then, the Ibovespa had accumulated losses of almost 10 thousand points (6.38%) until Monday (25). But what are the reasons behind the sudden drop in the Brazilian stock market?
First, there are the external factors that need to be taken into account.
With the persistence of inflation in the United States, representatives of the Federal Reserve (Fed, the US central bank) have adopted an increasingly tough stance, giving signs that interest rates in the country may rise beyond the level considered neutral later this year. .
Faced with the prospect of higher interest rates in the world’s largest economy, investors — especially foreigners — tend to adopt a more cautious stance on assets that offer higher risks, such as stocks listed on stock exchanges in emerging nations.
Thus, the vigorous flow of foreign capital towards the B3 observed throughout the first quarter begins to wane, as well as in other parts of the world, resulting in an appreciation of the dollar against a number of emerging currencies.
In addition, the decline in the prices of one of the most relevant commodities for the Brazilian stock exchange in the month weighs on the index: iron ore.
With China’s promise to reduce its steel production in 2022 and the constant lockdowns that have caused a slowdown in the Chinese economy in recent months, the price of iron ore in Chinese ports has fallen significantly.
This movement harms Brazilian mining companies, especially Vale (VALE3), which alone accounts for 14.6% of the Ibovespa.
Finally, there are domestic factors, such as the concern with the Brazilian fiscal situation in view of the granting of readjustments to federal public servants and the approach of the October elections, which are already starting to enter the radar of investors.
Investors’ hope in the short term is the first quarter balance sheet season for Brazilian companies, which can bring positive surprises and thus interrupt the negative sequence that the Ibovespa has been experiencing in recent weeks.
Read on ‘Investigating the Market’ (exclusive to UOL Investimentos subscribers): information about the purchase of Twitter by billionaire Elon Musk, CEO of the automaker Tesla.
Levante’s Chief Strategist and Founding Partner
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