Oil surge boosts agricultural commodities, supporting Brazilian exports as geopolitical tensions reshape markets
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The war in the Middle East was the main driver behind higher prices for some agricultural commodities in March. Rising oil prices pushed soybean oil up more than 13% on the Chicago Board of Trade last month, lifting soybean prices along with it. The increase in crude also drove gains in sugar and cotton prices in New York.
When oil prices rise, demand for soybean oil increases because it is used to make biodiesel, a renewable fuel alternative when fossil-fuel products such as diesel become more expensive. According to Valor Data, soybeans ended March up 4.2%, with the average price of second-month contracts, typically the most liquid, reaching $11.85 a bushel.
Supply-and-demand fundamentals had suggested soybean prices would fall, but geopolitical instability was so intense that the opposite happened, said Marcela Marini, senior grains analyst at Rabobank.
“If not for this geopolitical factor, soybeans could be trading lower, in response to the supply-and-demand backdrop,” she said. “Brazil is harvesting a record crop and Chinese demand is not rising in the same proportion as supply,” she added.
The biggest gain in Chicago was wheat, which ended the month up 8.5%, with an average price of $6.02 a bushel. Élcio Bento, an analyst at Safras & Mercado, said that expectations of a smaller U.S. wheat planting area were key to that increase.
U.S. farmers are expected to plant 17.6 million hectares of wheat in the 2026-27 season, which, if confirmed, would be the smallest area since 1919, according to the U.S. Department of Agriculture. In the previous season, planted area totaled 18.33 million hectares.
Bento noted that the Middle East conflict spilled over into the wheat market especially after the Houthis, the armed group from Yemen, said they could join the war in support of Iran and threatened to disrupt cargo flows through the Suez Canal.
“That raises logistics costs for wheat coming from Europe, Russia and Ukraine. On the other hand, it benefits other major producers using different routes, such as Argentina and Australia, as well as the United States, which may see stronger demand and firmer prices,” he said.
Corn prices also rose in Chicago. Futures climbed 5.7% to an average of $4.64 a bushel. According to Rabobank’s Marini, strong demand for U.S. corn, with record shipments and higher biofuel consumption, helped lift prices.
Sugar rises with oil
In New York, the sharp rise in oil prices had a direct effect on sugar, which climbed 8.1% to 14.93 cents a pound. More expensive oil directly affects sugar supply because it tends to improve ethanol’s competitiveness against gasoline in Brazil. That encourages Brazilian sugar mills to divert more cane toward biofuel production, reducing sugar output from the world’s largest producer and exporter.
“The consolidation of oil above $100 and the lack of signs that we will see a ceasefire are making the market increasingly aware that gasoline will become more expensive. At the same time, ethanol is becoming more attractive in the production mix relative to sugar,” said Marcelo Filho, a market intelligence analyst at StoneX.
Cotton also rose alongside oil. Futures for the fiber gained 6% in March, averaging 68.29 cents a pound. When oil becomes more expensive, synthetic fabrics also rise in price, which opens the way for stronger demand for natural fibers such as cotton.
Also in New York, frozen concentrated orange juice rose 3.4% to an average of $1.82 a pound. Arabica coffee ended the month up 1.2%, at $2.94 a pound.
Among soft commodities, only cocoa fell in March, still under pressure from abundant supply and weak demand. Futures dropped 9.9% to an average of $3,26 a tonne.
*By Paulo Santos — Campina Grande
Source: Valor International
https://valorinternational.globo.com/
JBS Biotech unit in Florianópolis receives $37m investment
JBS is set to inaugurate a research center in Florianópolis focused on the development of cultivated protein. Named JBS Biotech, the facility has been designed to operate across the full value chain—from early-stage research to industrial scale—in the market for lab-built protein supplements derived from cells similar to animal muscle tissue.
The multinational’s biotechnology arm aims to advance research and development to produce “superproteins” with tailored characteristics. According to CEO Gilberto Tomazoni, “it is not meat, but cultivated protein.”
Lab-produced biotechnology will serve as a food supplement ingredient to be used in shakes, cereal bars, and JBS products. Tomazoni added that the goal of JBS Biotech is to accelerate proof-of-concept work and pave the way for future industrial-scale applications.
The new complex includes more than 20 laboratories spread across 4,000 square meters at the Sapiens Parque innovation center. Chemical engineer Fernanda Berti, who holds a postdoctoral degree from the European Institute of Excellence in Tissue Engineering and Regenerative Medicine, will lead the division.
Four years ago, JBS announced a $100 million investment to enter the cultivated protein segment. The outlay included the construction of the biotechnology center in Florianópolis, which received $37 million, and, in Spain, the first cultivated protein plant of BioTech Foods, in which the multinational is the majority shareholder.
Berti said the research center in Santa Catarina’s capital focuses on developing technology rather than finished products—namely functional proteins and bioactive ingredients that complement JBS’s existing portfolio. “We are entering a new frontier, where it is possible to understand the potential of protein-based foods at the molecular level and develop solutions with tailored nutritional and functional characteristics for different consumer needs,” she said.
The global protein supplements market is estimated to have generated $30 billion in 2025 and is expected to reach $63 billion by 2033, growing at an average annual rate of 10.3% between 2026 and 2033, according to U.S. market research firm Grand View Research. The consultancy said rising awareness of health and wellness is driving the segment.
Tomazoni said consumer behavior is increasingly focused on longevity and quality of life. “Now we have the [weight-loss] injections, a medical technology that has been changing consumer behavior. This is a group seeking advanced precision nutrition,” he said.
*By Marcos Fantin, Globo Rural — São Paulo
Source:Valor International https://valorinternational.globo.com/From Taurus to WEG, companies say U.S. trade barriers hurt revenue and margins, even as some effects begin to ease
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Gunmaker Taurus expects at some point to recover $18 million it paid in export tariffs to the United States, charges that were struck down in February by the country’s Supreme Court.
Like Taurus, other large Brazilian companies with exports to the U.S. or production in North America spent the second half of 2025 trying to find ways around the impact of Washington’s tariff offensive.
Now that fourth-quarter and full-year 2025 earnings season has passed, manufacturers such as Tupy, Iochpe-Maxion, WEG and Taurus itself are calculating the damage U.S. tariffs inflicted on their results.
“Our war is over,” Taurus Chief Executive Salesio Nuhs said on the company’s fourth-quarter earnings call, referring to the end of the 50% tariff that had been applied to shipments to the U.S.
Firearms were not included on the list of products exempted from the 40% surcharge announced by U.S. President Donald Trump in July last year, which was added to the initial 10% “reciprocal” tariff.
Indirect damage
Brazilian multinational Iochpe-Maxion, which operates in 14 countries producing vehicle wheels and components for the transport industry, faced a R$700 million hit to revenue because of the tariff shock. Since it has four plants in Mexico and the U.S., the company did not suffer direct effects from the tariffs, as products made in Mexico are exempt when shipped to the U.S. market under regional trade agreements.
But its production was hurt by a drop in sales volumes of steel wheels and chassis for heavy trucks. The impact was indirect: as tariffs reduced U.S. imports, freight volumes and freight prices fell, weakening transport operators’ appetite to renew fleets.
“The drop in volumes was much more related to weaker end demand than to a direct effect from tariffs,” Renato Salum, Iochpe-Maxion’s finance and investor relations director, told Valor. “The decline in truck production in North America last year was more an indirect than a direct consequence of the tariffs. The end buyer does not immediately feel the inflationary impact on prices, which increases uncertainty and leads to postponed purchase decisions, affecting demand throughout the chain, including in Mexico,” Salum said.
In financial terms, Iochpe-Maxion saw “a reduction of roughly R$700 million in revenue, equivalent to about 35% of revenue in North American structural components,” he said.
Based on conversations with clients and analysis from specialized consultancies, the company expects demand to normalize in the second half of 2026.
“That view is supported by rising orders for heavy-duty vehicles since late 2025, a trend that strengthened at the start of this year.”
Rising prices
For Taurus, a new 10% tariff announced by Trump on the same day as the court ruling, under a different legal provision in U.S. trade law, was largely offset by the 7% price increase the company imposed on its products in the U.S. at the start of the tariff shock, according to Nuhs.
To reduce the impact, the company also activated assembly lines at its Taurus USA subsidiary in Georgia, shifting to exports of parts, which carry lower value than fully assembled products. All pistols in the G family are now made at the U.S. unit.
“In addition, we took radical measures on productivity, whether through headcount reduction or changes in our production processes,” Nuhs told Valor. Even so, Taurus estimates it paid $18 million in tariffs in 2025 and early this year.
The company hired two law firms in the U.S. to seek reimbursement of those tariffs and recently decided to continue with only one.
Mixed picture
Foundry group Tupy cited the tariff shock as one of the factors pressuring sales of structural components such as engine blocks and cylinder heads in its fourth-quarter performance. Net revenue from that segment fell 5.1% year on year, to R$1.31 billion in the period.
For this year, Tupy’s management said on the earnings call that it sees positive signs in the external environment, with reduced tariff-related uncertainty translating into higher orders from automakers, which should lift Tupy’s production from the second half onward. The company declined to comment.
In a report, analysts at Banco Safra said the removal of the 50% tariff should improve the electrical equipment manufacturer WEG’s competitiveness, allowing it to resume direct exports from Brazil to the U.S. rather than relying on Mexico as an intermediary.
In an interview with Valor in October last year, Chief Financial Officer André Rodrigues said the company’s Mexican unit was almost entirely dedicated to the U.S. market.
On the fourth-quarter earnings call, after the tariffs were struck down, Rodrigues said it was still too early to draw a new scenario and noted that the 50% tariff on imports of steel, aluminum and several related products remains in force under Section 232 of the Trade Expansion Act.
In a note on the results, Citi said that although revenue remained under pressure, WEG’s 34% gross margin in the fourth quarter suggests the company “is improving its mix and dealing with tariff effects more quickly than the market had anticipated.” WEG declined to comment.
*By Nelson Rocco — São Paulo
Source: Valor International
https://valorinternational.globo.com/
A exigência de pagamento por material cirúrgico em um procedimento já autorizado, sem a prestação de informações claras ao consumidor sobre custos adicionais, torna o débito controvertido e afasta a possibilidade de restrição de crédito.
1 de abril de 2026
Operadora foi proibida de negativar nome de paciente por dívida com material cirúrgico
Com base neste entendimento, a magistrada Fabiana Calil Canfour de Almeida, da 7ª Turma do Núcleo 4.0 em Segundo Grau do Tribunal de Justiça do Estado de São Paulo, concedeu liminar para proibir uma operadora de saúde e um hospital de inscreverem o nome de um paciente em cadastros de inadimplentes.
O litígio teve início após um beneficiário de plano de saúde na modalidade “livre escolha” passar por uma cirurgia de alta complexidade na coluna cervical. O procedimento teve aprovação prévia da operadora. Durante a operação, os médicos usaram materiais implantáveis indispensáveis ao sucesso da intervenção, como placas, parafusos e enxerto ósseo sintético.
Após a alta hospitalar, o consumidor foi surpreendido com uma cobrança direta do hospital referente aos insumos, no valor de R$ 79 mil. Ele narrou que não teve acesso a nenhuma informação prévia e específica sobre limitações de cobertura ou a apresentação de um orçamento detalhado antes de sua internação.
Diante da cobrança inesperada, o paciente ajuizou uma ação requerendo que a operadora cobrisse integralmente as despesas. Ele também pediu uma tutela de urgência para impedir a restrição de seu nome enquanto a validade da dívida fosse discutida. O juízo de primeira instância negou o pedido liminar.
Inconformado, o autor apresentou um Agravo de Instrumento ao TJ-SP. Ele argumentou que a decisão gerava risco de dano irreparável, uma vez que os insumos cobrados foram usados em uma cirurgia eletiva prescrita e aprovada. Afirmou ainda que os materiais não são acessórios, mas partes indissociáveis do ato médico, o que evidenciaria a falha no dever de transparência.
Proteção ao consumidor
Ao analisar o recurso, a relatora acolheu os argumentos do autor e concedeu a tutela de urgência. A magistrada apontou que a situação exigia a proteção do consumidor contra o risco de restrição de crédito, já que os valores exigidos ainda estão em discussão judicial.
“Analisados os argumentos do agravante, por medida de cautela, há que se deferir o efeito ativo pleiteado, para o fim de determinar que as rés se abstenham de inscrever ou manter o nome do autor, ora agravado, nos cadastros de proteção ao crédito, relativamente ao débito discutido nos autos”, determinou a magistrada.
A decisão ordenou que a cobrança coercitiva não seja feita até o julgamento final da demanda, estipulando a aplicação de multa diária de R$ 500 em caso de descumprimento. A relatora destacou que todos os demais pontos do litígio serão analisados de forma aprofundada pelo colegiado no julgamento do mérito recursal.
Agravo de Instrumento 4019195-92.2026.8.26.0000
Fonte: Conjur
Relator do TJ/RJ condicionou viagem ao pagamento de R$ 97 mil como garantia de cumprimento de eventual pena e indenização.
Injúria racial
01 de abril de 2026
O desembargador Luciano Silva Barreto, do TJ/RJ, autorizou a advogada argentina Agostina Páez, acusada de injúria racial, a voltar para a Argentina após o fim da instrução, mediante caução e manutenção das obrigações processuais.
Segundo a promotoria, ela ofendeu três funcionários de um bar em Ipanema, em janeiro, com expressões racistas e gestos imitando um macaco, condutas registradas em vídeo.
Medidas cautelares revistas após instrução
Ao analisar o pedido, o desembargador concluiu que, com o fim da instrução, as medidas cautelares já não eram mais necessárias, pois não havia atos processuais que exigissem a permanência da acusada no Brasil. Por isso, entendeu que a proibição de saída do país não se justificava no atual estágio da ação penal.
Ele também destacou que o MP e a assistência de acusação concordaram com a liberação, desde que fosse fixada uma garantia financeira para assegurar eventual indenização às vítimas. Na avaliação do desembargador, a negativa do pedido contrariou a posição convergente da acusação sem apresentar fundamento concreto bastante para manter cautelares tão gravosas.
Como condição para deixar o Brasil, a advogada deverá pagar R$ 97 mil, valor equivalente a 60 salários mínimos, a título de caução. A quantia funcionará como garantia para cumprimento de eventual pena e reparação de danos. Mesmo fora do país, a acusada deverá manter endereço e contatos atualizados, além de se apresentar à Justiça brasileira sempre que necessário.
O relator também considerou que a advogada é primária, possui profissão definida e colaborou com o andamento do processo, inclusive com manifestação pública de arrependimento. Para ele, esses elementos enfraquecem a hipótese de fuga.
Na decisão, o desembargador avaliou ainda que impedir a saída do país após o encerramento da instrução configuraria constrangimento indevido. Ressaltou que acordos internacionais entre Brasil e Argentina permitem que, em caso de condenação, a pena seja cumprida no país de origem.
Por fim, assinalou que a repercussão do caso não autoriza, por si só, a manutenção da restrição.
O caso
O episódio ocorreu em janeiro deste ano, em um bar localizado em Ipanema, zona Sul do Rio de Janeiro.
Segundo a investigação, Agostina Páez se envolveu em uma discussão após discordar do valor da conta e passou a dirigir ofensas de cunho racista a funcionários do estabelecimento.
De acordo com os relatos, ela chamou um dos empregados de “negro” de forma pejorativa e, em seguida, utilizou a expressão “mono” – termo que significa “macaco” em espanhol -, além de imitar gestos e sons do animal. As ofensas teriam sido reiteradas contra outros trabalhadores, inclusive fora do bar.
Em 18 de janeiro, a Justiça determinou a apreensão do passaporte e o uso de tornozeleira eletrônica, a pedido da Polícia Civil, como medidas cautelares durante a investigação.
Posteriormente, em 6 de fevereiro, após o oferecimento da denúncia pelo MP/RJ, o juiz de Direito da 37ª vara Criminal do Rio de Janeiro decretou a prisão preventiva da acusada, sob fundamento de reiteração das condutas e gravidade dos fatos.
No mesmo dia, no entanto, a prisão foi revogada, sendo mantidas as medidas cautelares, como a proibição de deixar o país e o monitoramento eletrônico.
A denúncia aponta que os relatos das vítimas foram corroborados por testemunhas, imagens de câmeras de segurança e outros registros produzidos no momento dos fatos, afastando a versão defensiva de que os gestos teriam sido mera brincadeira.
Desde então, Agostina respondia ao processo em liberdade, no Brasil, sob monitoramento, enquanto aguarda a sentença.
Processo: 0020717-23.2026.8.19.0000
Fonte: https://www.migalhas.com.br/quentes/452976/desembargador-autoriza-advogada-que-imitou-macaco-a-deixar-o-pais
Brazil’s Monetary Policy Committee leaves room to speed up easing, while a pause looks less likely unless war triggers broader market stress
The minutes of the Central Bank of Brazil’s latest Monetary Policy Committee, or COPOM, meeting reinforced the market’s view that the country remains in an easing cycle.
By Tuesday (24), the interpretation had gained ground that, even with the war in the Middle East and uncertainty over oil prices, a pause in rate cuts now appears less likely than a possible acceleration in the pace of monetary easing.
The committee sought to sound cautious, saying that its next steps would be determined “over time” amid an uncertain backdrop made even more complex by the war in the Middle East. Even so, it signaled the continuation of a Selic “calibration” cycle after lowering the base rate last week to 14.75% from 15%.
Among market participants, the minutes largely reinforced the message already delivered in the meeting statement. In the section explaining its decision, the committee said that “recent events” would not prevent the materialization of the guidance it had given in January, when it judged that the start of an interest-rate cutting cycle would be appropriate.
COPOM said it had analyzed “the options for the pace of the start of the base-rate calibration cycle” and concluded that a 25-basis-point cut was the most appropriate move at this stage. “The magnitude and duration of the calibration cycle will be determined over time, as new information is incorporated into its analyses,” it said.
In economists’ view, that passage shows an asymmetry in COPOM’s thinking. It would take a worsening of the war, with additional effects on oil prices and the exchange rate, to interrupt the cutting cycle, while any improvement in the external backdrop could allow the pace of cuts to accelerate to 50 basis points with fewer obstacles.
Felipe Sichel, chief economist at Porto Asset, said the minutes brought little new compared with the statement and made clear that COPOM believes rates remain highly restrictive and are having the expected effect on activity.
“The main discussion was about pace and about confirming that we are, in fact, in a rate-cutting cycle. The bar for interrupting that process is currently very high. Barring a disruption in the exchange rate and oil prices, the next moves remain Selic cuts,” he said.
According to BTG Pactual’s team, led by Tiago Berriel, the minutes reinforced a dovish tone by remaining broadly neutral relative to the Central Bank’s earlier communication.
“The minutes are consistent with the view that COPOM left the door open both to accelerate and to maintain the 25-basis-point pace ahead, depending on how the geopolitical backdrop evolves. The bar for interrupting the cycle seems high to us. So if the current scenario holds, our call remains for the cycle to continue with a 25-basis-point cut at the next meeting. A reduction in uncertainty with positive effects on energy prices would lead to an acceleration to a 50-basis-point move,” they said.
War clouds outlook
For Itaú Unibanco, the minutes suggest the Central Bank remains confident in its ability to calibrate the degree of monetary restriction.
COPOM said the magnitude and duration of the cycle will depend on incoming information.
In recent weeks, the war involving Israel, Iran, and the United States has added uncertainty and pushed oil prices higher. Brent crude has traded above $100 a barrel.
“That decision [to cut rates and wait for new information] is consistent with the current scenario, in which the duration and extent of geopolitical conflicts, as well as mixed signals about the pace of economic slowdown and its effects on price levels, make it harder to identify clear trends,” the committee said.
The market was also trying to understand why COPOM projected inflation at 3.3% over its relevant policy horizon, well below what economists had expected.
According to the committee, the oil price is assumed to follow the futures curve for the next six months and then rise 2% a year thereafter. “Given the observed Brent futures curve, this framework translated into a declining path in the second half of the year, after a sharp increase in the short term,” COPOM said.
“In practice, that meant an upward revision to short-term inflation, but with a partial reversal over the relevant horizon, helping keep the projection relatively lower for the third quarter of 2027,” BTG Pactual said.
For Itaú Unibanco’s economics team, led by former Central Bank director Mario Mesquita, the minutes indicate that the authority remains confident in its ability to calibrate the level of monetary restriction despite the global turbulence. “In fact, the minutes suggest that only the options of a 25-basis-point cut or a 50-basis-point cut were on the table,” the bank’s economists wrote.
According to Itaú, COPOM also highlighted that the disinflation process has lost momentum in more recent readings, something that was not in the statement, and that a possible reacceleration in activity in the first quarter “will not imply a major change in its current scenario.” In that sense, the bank said, the minutes are consistent with an acceleration in the pace of Selic cuts in April, to 50 basis points, which would take the rate to 14.25%.
Split signals
J.P. Morgan economists led by Cassiana Fernandez share the view that the next meeting could bring a larger cut. For the bank, the minutes signaled further easing, even as they stressed the uncertainty created by the war and played down the recent improvement in activity data. “It will be important to watch how the Central Bank handles these mixed signals in its estimate of the output gap,” they said.
For J.P. Morgan, the minutes brought little new on inflation. “The Central Bank referred to the inflation process using past-tense verbs, which probably reflects the expected impact of the conflict, already incorporated into the projections, on the IPCA inflation index. The Central Bank highlighted that inflation expectations had been falling before the conflict, but have risen again since then,” the U.S. bank’s economists said in a report.
*By Gabriel Roca, Victor Rezende and Gabriel Shinohara — São Paulo and Brasília
Source: Valor International
https://valorinternational.globo.com/
Brazilian government says expanding transport infrastructure is a priority and that it is working to improve legal certainty and unlock private investment
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China sees major investment opportunities in Brazil’s rail and port infrastructure, but the complexity of the country’s tax system is still viewed as a significant obstacle. Expanding the sector is one of the Brazilian government’s priorities, and officials say they are working to increase legal certainty and unlock private investment.
The issue was discussed during the panel “Logistics and Infrastructure: Connections Linking Ports, Railways and Chinese Investment in Brazil” at the Summit Valor Econômico Brazil-China 2026 on Wednesday (25) in Shanghai. The event is organized by Valor Econômico in association with the Brazilian Center for International Relations (Cebri) and the Chinese People’s Association for Friendship with Foreign Countries (CPAFFC). The panel was moderated by Valor Executive Editor Zínia Baeta.
“The biggest barrier in Brazil is the legal and tax environment, which is highly fragmented,” said Li Sisheng, executive vice president of Power China International. In his view, that helps explain why some foreign companies have struggled with investments in the country. He noted, however, that the company has $4 billion invested in Brazil and is studying projects in highways, railways, and energy.
Leonardo Ribeiro, rail transport secretary at Brazil’s Transport Ministry, said the government wants to raise railways’ share of the country’s transport matrix from 20% to 35%. According to Ribeiro, Brazil’s Railway Legal Framework now provides laws, regulations, and standardized contracts that ensure legal certainty for investment in the sector. “We also have strategies to provide guarantees so these projects can move forward under a risk-sharing structure in which the government will share with the private sector any extreme situations.”
Ding Songbing, general manager and head of strategy and research at Shanghai International Port, said there is ample room for the development and modernization of Brazilian ports.
“Ships are getting larger, and ports need to adapt,” he said. In his view, climate adaptation as well as automation and digitalization of processes are two other areas with strong potential.
Zhang Jianyu, deputy secretary-general and chief development director of the Belt and Road International Green Development Alliance, said China and Chinese stock exchanges have been tightening environmental requirements for companies, and those rules also apply to their operations abroad. “If a Chinese company does not have good sustainability results in the Brazilian market, for example, it will face difficulties raising capital here in China.”
The “Summit Valor Econômico Brazil-China 2026” is the third event of its kind organized by the newspaper in China since 2024. This edition is sponsored by BYD, the Rio city government through Invest.Rio, Embratur, the Rio de Janeiro state government, and ApexBrasil, with support from the São Paulo city government and São Paulo Negócios, Suzano, CBMM, Alibaba, the World Resources Institute, the Climate and Society Institute (iCS), CNA Senar, and the National Confederation of Industry (CNI).
The newspaper does not cover expenses when public officials invited to take part in the discussions attend the event.
- By Asdrúbal Figueiró — São Paulo
- Source: Valor International
- https://valorinternational.globo.com/
Yardeni Research chief says prolonged conflict could trigger deeper selloff, though he still finds opportunities in Brazil and other emerging markets
Despite risk aversion in global markets caused by the war in the Middle East, New York stocks have shown resilience and are still trading close to their record highs.
Still, economist Ed Yardeni, president of Yardeni Research, believes the conflict is unlikely to end anytime soon and sees the possibility of a further correction of as much as 15% in global stock markets, especially in economies more dependent on oil from the Persian Gulf region.
“My concern is that the conflict lasts longer than the market expects,” he said in an interview with Valor. “It may be difficult to achieve a quick resolution to the conflict. Iran has lost significant ground in recent weeks, but may not fully recognize that, and conflicts involving non-state or asymmetric actors rarely end quickly, tending to drag on for extended periods,” said the economist, who previously worked at Deutsche Bank and Prudential Financial.
In his view, even if Israel and the United States have succeeded in eliminating leaders, “that does not mean the philosophy of the Iranian regime will disappear.” Yardeni sees a 10% to 15% correction in the global stock market as likely, especially in countries more dependent on Middle Eastern oil, such as South Korea, Japan, and China.
Against the broader market view, Yardeni believes the dollar should continue to strengthen. After a sharp depreciation last year, the consensus among investors for this year had been that the currency would remain on a downward path. But the dollar has risen firmly since the start of the war with Iran. “This conflict is also reminding investors that, in times of uncertainty, the main safe haven is still the United States and the dollar.”
Despite U.S. dominance, Yardeni also sees good opportunities in emerging markets such as Brazil. Late last year, he changed his recommendation on emerging markets to overweight, the equivalent of a buy rating. With the start of the war, the environment changed.
Still, once the conflict ends, he believes emerging markets have the potential to perform well. “There is no urgency to get in immediately, however, since valuations may become even more attractive if the war persists.”
Market relief
On Monday (23), U.S. President Donald Trump announced a five-day delay in attacks on Iranian plants and energy infrastructure, citing “productive talks” with officials from the Islamic Republic, which triggered a positive market reaction, though Tehran denied it.
Yardeni believes the possibility of negotiations is a good sign, but said the economic outlook remains uncertain. “Negotiating does not always get you where you want to go. It is still not clear where this is heading.”
New York stocks have proved resilient to the deterioration in investor sentiment. At its low for the year so far, the S&P 500 was down 4.96% from its all-time high, reached on January 27, when the index closed at 6,978.60 points.
Even so, Yardeni said it is “realistic” to expect a deeper correction. “We also need to consider the risks of a global recession and a global bear market, which have increased significantly over the past week,” he said.
So far, market participants’ concern has centered on inflationary pressures from higher oil prices. Yardeni,, however, also pointed to the possibility that this scenario could weigh on U.S. economic growth, something that, in his view, will leave the Federal Reserve in a difficult position.
“The Fed probably will not be able to cut rates, because that could intensify the inflationary effects of the oil shock,” he said. “We have a classic problem: higher inflation and weaker growth at the same time, putting the Fed in an extremely difficult position. At some point, the Fed will have to recognize that there are limits to what monetary policy can do, and that the outcome will depend more on how the conflict evolves.”
Yardeni stressed that there is still no clear prospect of negotiations or a ceasefire and believes Trump’s stance has often been contradictory, helping to deepen the sense of uncertainty. “He has been consistent in calling for unconditional surrender, something the Iranian regime is unlikely to accept,” he said.
In line with the consensus view among market participants, Yardeni expects the Fed to leave rates unchanged for at least the next seven months, avoiding classifying the inflationary shock as “transitory” in light of the uncertainty. “Rates are still high enough to slow the economy, especially with oil prices rising. I also think productivity is coming back, which could be an important disinflationary force in the coming years,” he said.
Yardeni also rules out the possibility of monetary tightening unless the war lasts longer than expected and oil prices remain at very high levels.
“Warsh will probably be frustrated. If he is confirmed by the Senate, he will take office in an environment of higher inflation,” Yardeni said, referring to Kevin Warsh, Trump’s pick to lead the Fed. “In that context, it will be difficult to persuade other members to cut rates. Most will probably prefer not to act, recognizing the limits of monetary policy. Warsh will probably have to moderate his stance even further.”
Yardeni believes that if higher energy prices, and therefore higher inflation, end up weighing on consumers, market participants may revise corporate earnings forecasts downward, hurting stock-market performance. “We have had oil shocks in the past that led to stagflation, bear markets, and even a lost decade for the U.S. market. We should not be naive in thinking that cannot happen again,” he said.
Even so, for now he is maintaining his year-end target of 7,700 points for the S&P 500. “We have had similar crises in the past that turned into buying opportunities,” he said. “At the same time, it is conceivable that we could see a sell-off. It will be a very volatile market until the war is completely over, and we may be surprised.”
*By Luana Reis — São Paulo
Sosurce: Valor International
https://valorinternational.globo.com/