Friday (17) ended with a fall for IRB shares (IRBR3), which closed the day with a decline of 2.39%, quoted at R$42.90. At a time when the cyclical domestic economy – especially sensitive to interest rates – felt the impact of the negative numbers presented by the Central Bank’s Economic Activity Index (IBC-Br), the reinsurer’s shares were not able to resist the downturn scenario and followed the downward trend.
On the other hand, Ibovespa, the main index of the Brazilian stock exchange, showed a slight increase of 0.11%, closing at 124,773.21 points. This behavior demonstrates that, although IRB shares performed negatively, the market as a whole remained relatively stable. But something was not going well in the Brazilian economic panorama.
What explained the fall in IRB shares?
The IBC-Br, considered a preview of Brazil’s Gross Domestic Product (GDP), presented a somewhat worrying result last Friday: a drop of 0.06%. This indicator of economic activity is essential for evaluating the pace of the Brazilian economy, and a negative result tends to trigger a chain reaction in the stock market, especially in the shares of companies linked to the cyclical domestic economy, such as IRB.
These companies strongly feel the impacts of fluctuations in interest rates, and this was a factor that increased the fall in IRB shares. During Friday’s trading session, future interest rates operated close to their minimum values, as did the long interest rate curve in the United States.
Why does IBC-Br data impact shares?
IBC-Br data works as a thermometer for Brazil’s economic health. If the index shows a drop, it signals that the economy is shrinking; if there is growth, the economy is expanding. The association of IBC-Br with the health of companies is quite direct: companies operate better in an environment of economic growth, generate more profits, and this translates into an appreciation of shares in the market.
Therefore, a poor performance of the IBC-Br tends to negatively affect the performance of companies’ shares. In the specific case of IRB, in addition, a 0.06% drop in the index creates additional challenges, as the company operates in a sector strongly influenced by movements in the cyclical domestic economy.