Upcoming events that will influence Brazil’s financial markets this Week 27

RIO DE JANEIRO, BRAZIL – The week will be less hectic for financial markets, as some of them will be open only four trading days. Yesterday, the 4th of July, was Independence Day in the US, but today (5) is the official holiday, and markets are closed. Here in Brazil, Friday, July 9, will be a holiday in São Paulo state which will close banks and markets.

Outside, OPEC+ resumes the meeting that can increase oil production, which affects the commodity prices in the world.

Concerns about rising coronavirus cases continue across Asia – in Thailand and Indonesia, local authorities have reported a record number of new cases.

Even if there are fewer trading days, there is excitement in the markets. The next trading sessions are worth following the IPCA, the IGP-DI, and the retail sales, which will shape the week.

In the political agenda, there is a movement in the Chanber of Deputies where leaders are trying to reach an agreement to vote on income tax changes before the mid-year recess.

The Senate’s Covid CPI investigation, is causing political tension with new allegations – the government appears to have struck a deal to buy India’s Covaxin vaccine at 50% above the original bid value.

If the market understands that this crisis could affect the ability of the Ministry of Economy to approve reforms, there could be reflexes in equities.

INDEPENDENCE DAY

The United States is celebrating its Independence Day.

Friday’s jobs report (2) signaled a robust economic recovery (with positive revisions to May data) – employers hired a net 850,000 workers last month, a healthier reading than the 700,000 expected, and an acceleration after several months of disappointing growth.

Unemployment remains well above the pre-pandemic rate of 3.5%, and the economy is 6.8 million jobs below pre-pandemic levels. And although wages rose in June, the increase was less than expected – a good sign for investors concerned about inflationary pressures.

As a result, market attention will likely turn to the release of the Federal Reserve’s minutes on Wednesday (the 7th).

CARTEL DEALS

Internationally, oil prices fell as the United Arab Emirates resisted a plan by the Saudi Arabia-led OPEC oil cartel and allied producers, mainly Russia, to extend the global pact to cut oil production after April 2022 – the group failed to reach an agreement on Friday (2).

Negotiations on the dispute are due to resume on Monday (5).

One of the group’s biggest oil producers, the United Arab Emirates, is trying to boost output by engaging in a dispute with Saudi Arabia that has led to an attempt to keep production under control.

The oil price is affecting inflation indicators around the world, putting the conflict between the two countries at the center of discussions.

Since there is no market Monday in the US, the volume should be weaker. Outside, the day starts with the Purchasing Managers’ Indices (PMIs) for the Eurozone, Germany, and the UK, all for June.

Christine Lagarde, the ECB president, is on a panel and may have something to say for the markets (difficult, but not impossible).

The markets are following the resumption of the OPEC+ discussion, while here in Brazil, we turn our attention to the Focus Bulletin and the weekly trade balance.

BRAZIL IS NOT THE ONLY COUNTRY AT RISK OF AN ENERGY CRISIS

China is also flirting with the possibility, as weather conditions, increased energy demand, and restrictions on coal use are dealing a severe blow to the country’s power grid. The problem could last for months, hurting China’s economic recovery and weighing on global trade.

Nine of the country’s provinces have reported power problems in recent weeks – an area of China as large as the United Kingdom, Germany, France, and Japan combined.

Guangdong province, for example, a manufacturing hub responsible for more than 10 percent of China’s annual economic output, has rationed electricity for more than a month.

The restrictions have forced businesses across the province to close several days a week, and some local authorities warn that the power rationing could last until the end of the year.

The energy crisis even contributed to a slowdown in China’s manufacturing activity growth in June. The shortages could throw China’s recovery off track while creating more problems for global supply chains.