SAO PAULO – Ibovespa futures reopened this Thursday morning (21) following the losses suffered after the markets closed last night. As Paulo Guedes, Minister of Economy, explained details about the financing of the Auxílio Brasil program, the index increased losses the day before and retreated almost 2%, with increasingly clear signs that the spending ceiling will be breached.
Falling futures indicate that spot Ibovespa should open even more significantly lower, absorbing the latest news on the country’s fiscal problem; the day before, the Stock Exchange benchmark closed at a modest increase of 0.10%.
This morning, the MSCI Brazil Capped ETF (EWZ), the main ETF (passive management funds that track some index and are traded on the stock exchange) of Brazilian ADRs (in practice, the shares of Brazilian companies traded in the United States) fell about 4% in the pre-market of the New York Stock Exchange, already indicating a very negative session for the Brazilian stock exchange.
Guedes spoke about the Bolsa Família replacement at two events last night and reaffirmed the government’s intention to pay aid of at least R$400.
The part of Guedes’ speech that was not well digested by the market was about the breaking of the spending ceiling, so feared by investors. “We were studying whether we would bring forward the spending ceiling revision to 2026 or if we would ask for a waiver [perdão fiscal] to wear off this temporary layer of protection,” said the minister. According to Guedes, it would be a license with “a limited number, just over R$30 billion”.
Then, in an interview with CNN, the Minister of Citizenship, João Roma, said that the government intends to make the aid viable with fiscal responsibility and does not work with the possibility of an extra ceiling.
Inaccurate statements leave investors confused and more risk-averse. “The government is torn between maintaining fiscal austerity and increasing expenditures to deal with the effects of the pandemic, which affect a part of the population. This dichotomy brings confusion and it is very important to understand how the outcome will be”, says Alexandre Brito, manager of Finacap.
For some investors, statements made yesterday confirm that the spending ceiling will be breached, even though officials insist otherwise. “Paulo Guedes confirmed that part of the benefit will be paid outside the spending ceiling and that was what the market had been suffering. If there was any hope in the market that there would be a proposal within the ceiling, it was confirmed that there is no other alternative”, says Daniel Meireles, partner at HCI Invest.
The vote on the text of the PEC of the precatórios is scheduled for today, in a special commission in the Chamber. The meeting to discuss the Union’s judicial debts has already been postponed twice and should define the government’s fiscal space for financing the Brazil Aid.
Investors are also watching the developments in Covid’s final CPI report.
At 9:05 am (Brasilia time), Ibovespa futures maturing in December 2021 dropped 0.97% to 109 thousand points.
The commercial dollar opened higher and rose 1.86% to R$5.664 on purchase and R$5.665 on sale. The dollar futures for November 2021 advances 1.2% to R$ 5.675.
Future interest, which yesterday soared in the after market with Guedes’ statements, they start the day at an expressive high. In the futures interest market, the DI for January 2023 was up 28 basis points, at 10.44%; DI for January 2025 was up 34 basis points at 11.48%; and the DI for January 2027 recorded an increase of 41 basis points, at 11.88%.
Abroad, the news is not the best either. Chinese real estate giant Evergrande, which rocked markets last month, announced it has not reached an agreement to sell 50.1% of its stake in the property services business. The company, which is no longer paying certain debts, announced that there is no guarantee that it will be able to meet its financial obligations.
It is not yet known what the impact of a possible default (default) to China’s markets and economic growth. The Chinese Gross Domestic Product (GDP) has been revised downwards, a fact that has had negative repercussions among investors.
In the United States, after consecutive days of high and record scores, stock exchanges in New York should start the day in decline. That’s what the futures indexes indicate: Dow Jones drops 0.28%; S&P retreats 0.25% and the future Nasdaq has a negative variation of 0.28%.
The latest quarterly results of the companies were mixed. While Tesla had record numbers, IBM reported falling revenue. This morning, American Airlines also presented numbers considered positive.
In the American calendar of indicators, the weekly number of requests for unemployment benefits which reached 290 thousand in the week ended 16 October. The number came below economists’ forecast of 300,000 orders.
In Europe, stock exchanges operate at a low. The Stoxx 600, which brings together companies from 17 European countries in key sectors, retreated 0.2%. The Paris Stock Exchange (CAC-40) is down 0.35%, London (FTSE 100) is down 0.48%; and Frankfurt (DAX) with a slight drop of 0.05%.
corporate radar
Petrobras (PETR3;PETR4)
Petrobras (PETR3, PETR4) recorded an average production in the third quarter of this year 2.83 million barrels of oil equivalent per day (boe/d) of petroleum, natural gas and natural gas liquid (NGL).
According to the company, this was an increase of 1.2% compared to the second quarter of this year, but a retraction of 4.1% in the annual comparison. In the first nine months of this year, production retreats 3.1%.
Petrobras highlighted that the increase in production between July and September was mainly due to the entry into operation of the FPSO Carioca (Sepia field) in the Santos Basin pre-salt and the higher average production in the quarter of the FPSO P-70 (Atapu field), after reaching its production capacity in early July.
Credit Suisse analysts pointed out that total sales remained at very strong levels, while oil production increased slightly on a sequential basis, which was already known from public data available from the ANP. The main highlight was the reduction in inventories, which should boost the third quarter results. Another highlight was the drop in net exports, mainly due to sequentially lower export volumes, but also due to higher imports. Part of the drop in net exports can be explained by the higher utilization rate of refineries at around 84%, against 74% in the second quarter.
JHSF (JHSF3)
JHSF informs that net contracted sales of development registered a drop of 18.8% in the third quarter of 2021 compared to the same period last year. In comparison, sales decreased from R$411.1 million to R$333.7 million.
In the accumulated from January to September this year, the result had an increase of 46.2%, compared to the first nine months of 2020, from R$ 850.5 million to R$ 1.243 billion, according to the operational preview disclosed by the developer.
Consolidated sales in the Company’s malls grew by 74.1% compared to the same period in 2020. Compared to the same months in 2019, when there were no operating and capacity restrictions, the increase was 45.1%.
In the statement, the company informs that the malls aimed at the high-income public were highlighted in the quarter. In comparison with the third quarter of 2020, Shopping Cidade Jardim’s sales grew 75.6%, while Catarina Fashion Outlet’s sales increased by 93.2%. Compared to the third quarter of 2019, the growth was, respectively, 70.3% and 47.9%.
Gafisa (GFSA3)
Gafisa (GFSA3) recorded gross sales of R$159 million in the third quarter of 2021, an increase of 11% year-on-year.
The construction company’s launches totaled R$ 692 million in the third quarter of 2021, reaching R$ 1 billion in launches in 2021.
BRF (BRFS3) and Marfrig (MRFG3)
After submitting an order in the Administrative Council for Economic Defense (Cade) asking for the reopening of the analysis of the purchase of shares of BRF (BRFS3) by Marfrig (MRFG3), board member Lenisa Prado changed her position and gave up on the revaluation. The other board members accompanied Lenisa and, with that, the approval of the deal, which had been given by Cade’s General Superintendence at the end of September, was maintained.
Last week, the counselor presented an order asking that the operation be analyzed by Cade’s court. According to Cade’s rules, the General Superintendence – the area responsible for investigations and process instructions – can approve operations that it understands does not pose risks to competition.
In May, Marfrig announced the purchase of 24.23% of the shares of BRF. Soon after, on June 3, it increased its stake to 31.66% of the company’s share capital.
According to Marfrig, the objective is to become a passive investor in BRF.
Safe harbor (PSSA3)
Porto Seguro (PSSA3) approved the company’s capital increase, in the amount of R$4 billion, through the capitalization of profit reserves, with stock bonuses.
With the increase, the company’s capital stock increased to R$8.5 billion, divided into 646,586,060 common shares.
Braskem (BRKM5)
Braskem (BRKM5) informed that its subsidiary Braskem Idesa obtained the necessary votes to approve the ethane supply contracts with Pemex.
In addition, Braskem Idesa completed the replacement of the US$1.35 billion balance of the debt refinancing plan with a new debt with a 9-year term.
Braskem Idesa’s new capital structure includes the issuance of debt securities with commitment and interest linked to targets for reducing carbon emissions
BMG (BMGB4)
Banco BMG announced that its subsidiary CBFácil Corretora de Seguros signed a contractual instrument with the intention of acquiring a stake in O2OBOTS Inteligência Artificial.
O2OBOTS is a fintech operating in the development, licensing and maintenance of software specialized in artificial intelligence for the sale of financial and insurance products.
CCR (CCRO3)
CCR (CCRO3) informed that its subsidiary Concessionária do Bloco Sul signed a concession contract for nine airports in the southern region of the country.
The airports are in Curitiba (in São José dos Pinhais-PR), Foz do Iguaçu (PR), Londrina (PR), Bacacheri (PR), Navegantes (SC), Joinville (SC), Pelotas (RS), Uruguaiana ( RS) and Bagé (RS).
Intelbras (INTB3)
Intelbras (INTB3) informed that the controlling shareholders of the company, Família Freitas, have committed to sell to Dahua a total of 4,600,001 common shares issued by the company, corresponding to 1.4% of its share capital.
After the closing of the transaction, the controlling shareholders will jointly own 209.928,391 shares issued by the company, representing 64.1% of its capital stock. Dahua, on the other hand, will have 32,761,111 shares issued by the company, representing 10.0% of its share capital.
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