Stock market now: Ibovespa celebrates inflation below expectations and rides up with Wall Street; dollar goes up

THE NEXT BIG BRAZILIAN TOPIC

Outside, Asian stocks fell to a two-month low on Thursday, while the dollar rose internationally, even as the impasse in negotiations to raise the debt ceiling undermines risk assets, due to concerns about the impact on the economy. global market if the US government defaults on its debt (with no resolution in sight, investors remained cautious).

Following the more bearish global momentum, MSCI’s broadest index of Asia-Pacific stocks hit its lowest since March 21, heading into its second straight month of losses.

European markets have a mixed morning, without unison movement among the region’s indices, while American futures manage to sustain a predominantly positive tone, driven by the rise in Nasdaq index futures.

The high is driven by big names in the technology segment, especially Nvidia, which surprised the market with its projections related to artificial intelligence.

At the same time, negotiators for Democratic President Joe Biden and Republican Kevin McCarthy held what both sides called productive talks, racing to reach an agreement on the debt ceiling.

See…

00:50 — After the framework we have Tax Reform

In Brazil, we saw the fiscal framework overthrow the highlights and go to the Federal Senate, after having the text approved by 372 votes, against 257 necessary. With that, we also expect a quick procedure in the other legislative house – the president of the Senate, Rodrigo Pacheco, wants to take the matter to a vote directly in the plenary. The sooner the better.

The work of parliamentarians on the issue was notable, with the strengthening of Haddad’s economic team. We just don’t know if the pace will be maintained for the next big topic: Tax Reform (even more problematic).

Apart from the political agenda, today we have some interesting economic data, such as the second GDP preview for the first quarter and the official inflation preview for May, the IPCA-15.

Today’s data, lower than expected, can help the BC to create a narrative for the fall in interest rates.

01:41 — The American headache

Yesterday, the Dow Jones Industrial Average dropped for a fourth straight session as investors braced for turmoil amid ongoing debt ceiling talks.

House Speaker Kevin McCarthy said Republicans and the White House were a long way from a deal on spending, although he also told House members to stay close to the capital over the weekend if a deal is reached.

Time constraints and political pressures forcing Democrats to move closer to the Republican position on spending levels and accept bigger budget cuts than they expected is the most likely path to a deal at this stage.

The delay in creating a resolution, however, puts pressure on assets.

Minutes from the May 2-3 Federal Reserve meeting didn’t help, as the document showed a divided monetary authority on the way forward.

02:23 — And what to do in June?

The question that remains for the market is the following: will the Federal Reserve raise interest rates at its next meeting in June for the 11th consecutive time or will it take a break? For now, investors seem to be betting on the latter, as I understand it to be the most likely.

A series of recent economic data, however, came in stronger than expected.

Retail spending rebounded in April after two months of declines, suggesting consumers are still spending despite tight pockets.

At the same time, jobless claims fell more than expected in the week ended May 13, falling below historical averages.

Even worse was Fed Chairman Jerome Powell’s speech, which weighed on investors.

In a panel with former Fed chief Ben Bernanke, Powell said uncertainty remains around how much demand will decline from tighter credit conditions and the lagged effects of rising rates.

Still, it seems unlikely that the Fed will raise rates in June — interest rate hikes flow through the economy with a lag, taking months for the effect to play out in the economy.

03:16 — The power of artificial intelligence

Nvidia reported first-quarter results on Wednesday with a stronger-than-expected forecast, which sent shares up 26% after-hours.

Before yesterday’s after-hours rally, shares of Nvidia were already up 109% so far in 2023, driven mainly by optimism stemming from the company’s leading position in the market for artificial intelligence chips.

Nvidia CEO Jensen Huang said the company is seeing increasing demand for its data center products. So much so that the group recorded sales of US$ 4.28 billion, against expectations of US$ 3.9 billion, an increase of 14% year-on-year.

Performance was driven by demand for its GPU chips from cloud vendors, as well as large consumer internet companies, which use Nvidia chips to train and deploy artificial intelligence (AI) applications.

Nvidia’s positive outlook brightened the outlook for the chip manufacturing sector, which is facing a possible slowdown in demand amid worsening global economic conditions.

The semiconductor company said it is increasing supply to meet growing demand for its artificial intelligence chips, which are used to power ChatGPT and many similar services.

04:11 — And regulation?

As generative AI systems take hold in many industries, warnings have been growing about the need to regulate emerging tools and address the potential downsides of the technology.

Recently, the CEO of OpenAI, creators of ChatGPT, testified to Congress on the need for government intervention to mitigate the risks of increasingly powerful artificial intelligence models.

While lawmakers did not come up with any specific proposals at the first AI hearing, several ideas were raised and more are on the horizon.

With that, the Biden administration is taking new steps to advance “responsible artificial intelligence.” The first is to update its roadmap, called the National AI R&D Strategic Plan, which outlines key priorities and goals for federal investment in AI research and development.

He also launched a new call for public opinion on critical AI issues such as protecting the rights and safety of individuals.

Social media came under similar scrutiny during its growth stages in the 2010s. Under the microscope were addictive behavior, social comparison disorders, and data privacy and misinformation.

The difference this time around is that AI companies are calling for greater regulation as they disrupt current models, compared to resistance from previously regulated companies.