{"id":93652,"date":"2025-04-08T20:28:37","date_gmt":"2025-04-08T23:28:37","guid":{"rendered":"https:\/\/murray.adv.br\/?p=93652"},"modified":"2025-04-08T20:28:40","modified_gmt":"2025-04-08T23:28:40","slug":"trumps-threat-to-china-weighs-on-brazilian-assets","status":"publish","type":"post","link":"https:\/\/murray.adv.br\/en\/trumps-threat-to-china-weighs-on-brazilian-assets\/","title":{"rendered":"Trump\u2019s threat to China weighs on Brazilian assets"},"content":{"rendered":"\n
Ibovespa falls sharply, real weakens to R$5.91 per dollar amid global sell-off<\/em><\/h6>\n\n\n\n

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04\/08\/2025 <\/p>\n\n\n\n

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A surge in global market volatility led to broad losses in Brazilian assets on Monday (7), following renewed trade tensions between the United States and China<\/strong>. A threat by U.S. President Donald Trump to impose an additional 50% tariff on Chinese products hit emerging markets hard, dragging down Brazilian stocks, pushing the U.S. dollar to its highest level against the real since February 28, and driving long-term interest rates higher.<\/p>\n\n\n\n

Mr. Trump\u2019s increasingly aggressive trade stance<\/a> has stoked recession fears in global markets in recent sessions. Following several banks\u2019 warnings about a possible recession this year, Goldman Sachs lowered its U.S. GDP growth forecast from 1% to 0.5% and raised its 12-month recession probability from 35% to 45%.<\/p>\n\n\n\n

Against this backdrop, emerging market assets underperformed developed markets on Monday. In Brazil, the foreign exchange rate jumped 1.29% to R$5.91 per dollar. The U.S. currency posted even larger gains against other emerging market currencies, including the Colombian peso, Chilean peso, and South African rand.<\/p>\n\n\n\n

In equities, benchmark Ibovespa dropped 1.31%, mirroring the decline in the iShares MSCI Brazil ETF (EWZ) in New York, which fell 2.24%. This contrasted with the near-flat performance of the S&P 500, which dipped 0.23% amid a volatile session. Emerging market stocks (EEM) slumped 3.72%, largely dragged down by Asia. The iShares MSCI China ETF (MCHI) ended the day with a steep 8% loss.<\/p>\n\n\n\n

Emerging market impact<\/strong><\/p>\n\n\n\n

The slowdown in the U.S. economy could also weigh on emerging markets, said Gilberto Nagai, head of equities at SulAm\u00e9rica Investimentos. \u201cWhat we\u2019re seeing unfold doesn\u2019t look like a good deal for anyone\u2014it\u2019s full of uncertainty and depends entirely on Trump. If the U.S. economy slows significantly, there will be a broad risk-off movement across markets,\u201d he said.<\/p>\n\n\n\n

Fears of a Chinese slowdown triggered another sharp drop in oil prices, which fell for a third straight session. The decline pressured oil-related stocks on the Ibovespa after China announced reciprocal tariffs on Wednesday.<\/p>\n\n\n\n

Markets are now discussing whether the sharp drop in oil could force Brazil\u2019s oil giant Petrobras to adjust gasoline prices. Ativa Investimentos said the move would be negative for Petrobras shares, particularly after the company cut diesel prices just 60 days after a price hike announced on January 31.<\/p>\n\n\n\n

\u201cIf another price cut is confirmed, it would be the third move in less than 120 days, exposing the company\u2019s pricing policy\u2014designed to shield domestic prices from barrel volatility\u2014as ineffective,\u201d analysts said.<\/p>\n\n\n\n

Rising interest rates<\/strong><\/p>\n\n\n\n

Brazilian interest rates also provided no support for stocks. Long-term yields rose steadily throughout the session as investors corrected recent excesses and tracked the uptick in U.S. Treasury yields.<\/p>\n\n\n\n

At the close, the DI (Interbank Deposit) rate for January 2029 climbed from 14.03% to 14.16%, and the January 2031 DI advanced from 14.35% to 14.48%.<\/p>\n\n\n\n

Citi said it closed its positions betting on falling interest rates futures and on rising fixed-rate NTN-F bonds maturing in January 2029. \u201cWhile we still believe the economic outlook supports medium-term disinflation and lower long-term rates in Brazil, we\u2019re concerned about the spillover effects from equity market selloffs via the dollar\/real, along with potential idiosyncratic risk surprises,\u201d the bank\u2019s strategists said.<\/p>\n\n\n\n

On the other hand, Morgan Stanley strategist, Ioana Zamfir, doubled down on her position, betting on a decline of Brazilian interest rate futures (January 2029 DI), and added a new bet on falling prices of inflation-linked NTN-B bonds maturing in August 2028.<\/p>\n\n\n\n

Ms. Zamfir said the rates position reflects expectations of a potential slowdown in Brazil\u2019s economy amid relatively muted fiscal policy risks and a more favorable global interest rate environment. She described the short position on medium-term real interest rates as \u201cextremely attractive\u201d and argued \u201cit does not match global growth risks or Brazil\u2019s medium-term economic outlook.\u201d<\/p>\n\n\n\n

Challenging environment<\/strong><\/p>\n\n\n\n

Vagner Alves, fixed-income portfolio manager at Kinea Investimentos, said that while the market reaction has been sharp, emerging markets will likely continue to suffer as recession fears grow. \u201cIn this environment, it’s natural for emerging market assets to lose more value\u2014especially those tied to commodity prices, like Brazil\u2019s,\u201d he said.<\/p>\n\n\n\n

\u201cThe recent moves happened very quickly, so we may see a partial correction, but that\u2019s more likely in U.S. markets. For emerging markets, the environment remains challenging,\u201d said Mr. Alves.<\/p>\n\n\n\n

A reversal in this scenario would require a drastic shift in the U.S. government\u2019s stance, \u201cbut there\u2019s no sign of that\u2014quite the opposite. There was even a rumor today [Monday] of a [tariff] delay, but the White House quickly denied it,\u201d he noted.<\/p>\n\n\n\n

Despite investor fears about a severe global slowdown, Mr. Alves said the downturn may not be so deep. \u201cCountries still have fiscal tools they can use. That could help reverse the current market gloom,\u201d he said.<\/p>\n\n\n\n

Marcello Siniscalchi, a partner at Asset 1, said the slightly more resilient performance of Brazilian assets in recent sessions was partly due to Brazil facing a lower tariff rate of 10%. He also noted that foreign investors had already reduced their exposure to local markets, leaving them with fewer positions to liquidate. \u201cInvestors held a certain position based on a specific volatility pattern. When that pattern changed, they had to cut back,\u201d he said.<\/p>\n\n\n\n

Currently, Asset 1 has a clearer outlook on equities and interest rates than on currencies. The firm\u2019s chief economist, Luis Cezario, said they expect a slowdown in the U.S. and Europe, and foresee back-and-forth developments in trade negotiations between the two sides. As a result, he said it will be hard to predict currency moves.<\/p>\n\n\n\n

\u201cIt\u2019s difficult to know how the dollar will behave against the euro, or whether it will strengthen. Will Europe remain a more independent player? Tariffs lead to lower growth and higher inflation. It\u2019s easier to believe that equities will fall in a recession than to predict which currency will come out on top,\u201d he said.<\/p>\n\n\n\n

*By\u00a0Maria Fernanda Salinet,\u00a0Arthur Cagliari,\u00a0Bruna Furlani\u00a0and\u00a0Gabriel Caldeira\u00a0\u2014 S\u00e3o Paulo<\/strong><\/p>\n\n\n\n

Source: Valor International<\/p>\n\n\n\n

\nhttps:\/\/valorinternational.globo.com\/\n<\/div><\/figure>\n","protected":false},"excerpt":{"rendered":"

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