Five hot financial market topics for Brazil this coming week

RIO DE JANEIRO, BRAZIL – On Tuesday afternoon, the U.S. Fed market committee decision and Jerome Powell’s statement will drive global markets. Investors are still watching Brazil’s attempt to pass the proposed constitutional amendment (PEC) postponing court-ordered federal debt or other solutions to find financing for the government’s proposed new social program without exceeding the constitutional spending limit.

The agenda also includes payrolls in the U.S., BOE decision, PMIs in China and industrial production in Brazil. The 5G auction, bank balance figures and the threat of a truckers’ strike are also on the radar.

COPOM MINUTES

The market will be looking for more details in the minutes regarding the COPOM statement labelled as dovish, among them the division of monetary policy focus between 2022 and 2033. Some analysts also considered the Central Bank’s tone on inflationary and fiscal risks less emphatic than expected.

The minutes will be released at 7 AM local time before Central Bank president Roberto Campos Neto takes part in the COP26 event. The Bank’s Focus report on Monday may include higher projections for the SELIC benchmark and for inflation, also reflecting the IPCA-15 interest projection, which has exceeded estimates. The week ahead will also include September’s industrial production and October’s balance figures, the FENABRAVE, manufacturing PMI, IPC-Fipe and IPC-S.

FOMC, BOE, PAYROLL

While the COPOM minutes may drive the local market on Wednesday morning, in the afternoon all eyes will turn to the FOMC decision, followed by Powell’s statement. The Fed is expected to announce that it will begin to end the bond-buying program implemented since last year.

On the following day, it will be the British Central Bank’s turn to hold its meeting. Potential indications of monetary tightening can also be confirmed in ECB leaders’ addresses throughout the week. The U.S. will also release key data, such as the October payrolls report, due on Friday, with an estimated +400,000 jobs. China will release PMIs for industry and services, with the potential to impact markets on Monday.

PEC AND SOCIAL PROGRAM

Lacking a safe quorum for the ruling base, the vote on the Court-order debt PEC in the Chamber of Deputies was deferred from last week to November 3.

The government’s struggle to pass the amendment, which would enable the new “Auxílio Brasil” (Brazil Aid) social program, has triggered concerns in the market that the PEC may be abandoned and potentially even more negative measures for public finances may be adopted.

Among the options would be the extension of the emergency aid, through extraordinary credit, or even the declaration of a state of calamity, according to local media. Truckers maintained their strike call for Monday, but will not block roads.

PETROBRAS

Senate President Rodrigo Pacheco said he will meet with the presidency of Petrobras and governors this week to discuss fuel prices. An equalizer fund and the price policy linked to the exchange rate will be discussed, he said.

President Jair Bolsonaro said the government is trying to find a way to change the law on the state-owned oil company’s price adjustments. He criticized the fact that the price of fuel is linked to the dollar and said that “Petrobras must be a company that makes a profit that is not as high as it has been.”

BNDES (National Bank for Economic and Social Development) President Gustavo Montezano said that the discussion about Petrobras’ privatization is “very productive” and “healthy,” albeit nothing more than that for the time being. The bank, which has coordinated several privatization processes during Bolsonaro’s presidency, has not been officially notified by the government to initiate any action in this respect, he said.

5G AND BANKS

On November 4, the National Telecommunications Agency will promote the largest spectrum offer in history by auctioning radio frequencies in the 700 MHz, 2.3 GHz, 3.5 GHz and 26 GHz mobile access bands. The auction will generate approximately R$50 (US$9) billion, R$3 billion of which will revert to the Treasury’s coffers if all lots are auctioned, the agency said.

Fifteen bidders have submitted documentation to take part in the auction.

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