After closing up 1.91% the day before, the Ibovespa started today’s session (23) down 1.44%, at 112,430 points, around 10:20 am (Brasília time).
B3’s main index operates in line with the external market, which shows strong risk aversion movement as rising interest rates in major economies fuel recession fears.
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Here, the Central Bank decided on Wednesday (21) to keep the Selic rate at 13.75% per year, interrupting an aggressive cycle of monetary tightening, but considered that it will not hesitate to resume interest rate hikes if the reduction in inflation not go as expected.
On the same day, the Federal Reserve, the US central bank, raised its interest rate by 0.75 percentage point, monetary tightening accompanied by sharp upward revisions in projections for the level of borrowing costs this year and next.
Higher interest rates make the US fixed income market more profitable, but they also increase the likelihood of a recession in the country, which has triggered a strong search for safe assets in recent weeks.
Yesterday (22), the dollar retreated 1.12%, to R$ 5.1157. At the beginning of today’s session, the US currency rose 1.76% to R$5.2047.
Despite the bounce in this trading session, the dollar was still on track to close down more than 1% from last Friday’s close, after it retreated significantly in three of this week’s four full sessions.
At around 10:20 am, Wall Street futures were down. The Dow Jones was down 1.03% to 29,839 points, the S&P 500 was down 1.01% to 3,733 points, and the Nasdaq was down 0.86% to 11,465 points.
Interest is also a Bank of England policy. The day before, the BoE raised its rates and said it would continue to “respond strongly as needed” to inflation, even as the British economy could slip into recession.
Amid this backdrop, market participants also raised their expectations for tightening by the European Central Bank, which is expected to raise rates again on October 23.
The ECB is now expected to raise its own key rate from 0.75% now to nearly 3% next year.
This morning, European markets digest the weak data from the UK, German and Eurozone purchasing managers’ indices (PMI). The FTSE 100 was down 1.87%, the DAX -1.58%, the FTSE MIB was down 2.41% and the Stoxx 600 was down 1.77%.
Asian stocks ended today’s trading lower, also with an eye on the likelihood of a recession in global economies. Tokyo did not operate because of the holiday. In China, Shanghai lost 0.66% and Shenzhen dropped 1.41%.
In Hong Kong, Hang Seng dropped 1.18%. The Kospi dropped 1.81% and in Taiwan, the Taiex dropped 1.16%.
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