Most Asian markets closed lower as Chinese manufacturing activity shrank in August. New York index futures run without a specific direction Wednesday morning (31), as investors grapple with concerns about the more restrictive policy of the US Federal Reserve.
On Tuesday, New York Federal Reserve Chairman John Williams said he sees interest rates rising further and remaining at those levels until inflation is brought under control.
Ahead of the August payroll, which investors are watching closely on Friday, more Fed speeches are expected this Wednesday. Chicago ADP and PMI employment data will also be released in the morning.
In Europe, markets were in the red after the Eurozone CPI for August rose 9.1% y/y, just above the Refinitiv consensus which had forecast a 9% rise. The data should boost bets for a 0.75 percentage point (pp) rate hike at the upcoming European Central Bank (ECB) meeting.
Meanwhile, on the domestic docket, the unemployment rate for July measured by the ongoing PNAD survey is due to be released. The Refinitiv consensus expects the unemployment rate to be 9.1%. At 9:30 am, the preliminary consolidated public sector result for July was announced, with Refinitiv consensus of a surplus of R$21.4 billion.
Check out more highlights:
1. Global Scholarships
US futures trading was mixed Wednesday morning after three consecutive sessions of spot index losses, as investors deal with the Federal Reserve’s more aggressive tone after Jackson Hole’s central bank speech last Friday.
New York Fed President John Williams said on Tuesday that it was “obvious” that the US central bank needed to raise interest rates “a lot more” by the end of the year.
With voting power in monetary decisions, Williams said interest rates will likely need to stay “a little bit above” the 3.5% mark.
Watch the performance of futures markets:
- Dow Jones Futures (USA), +0.11%
- S&P 500 futures contract (US), +0.17%
- Nasdaq Future (US), +0.28%
Asian markets mostly fell, after the Wall Street disaster the day before, and as investors digested factory production data in China. The official Chinese Manufacturing Purchasing Managers’ Index (PMI) for August slightly exceeded expectations, printing at 49.4 but still below the 50 mark, indicating a contraction in activity. The services PMI fell to 52.6 points.
In addition, major cities in China, including Dalian and Shenzhen, tightened Covid restrictions on Tuesday.
- Shanghai SE (China), -0.78%
- Nikkei (Japan), -0.37%
- Hang Seng Index (Hong Kong), +0.03%
- Kospi (South Korea) + 0.86%
European markets extended losses on Wednesday after inflation rose slightly from expectations in the Eurozone. The result of the Consumer Price Index (CPI) should strengthen bets on a more aggressive monetary policy by the European Central Bank.
The next meeting of the Monetary Authority will be held on September 8.
- FTSE 100 (UK), -0.54%
- Dax (Germany), -0.22%
- CAC 40 (France), -0.85%
- FTSE MIB (Italy), -0.07%
Oil prices have reversed the uptrend seen in early trading and are running lower amid concerns that fuel demand will suffer as China tightens Covid-19 restrictions and central banks raise interest rates.
Iron ore also fell again, posting a decline for the third consecutive month after activity data in China.
- West Texas Intermediate crude, down -1.56% at $90.21 a barrel
- Brent crude, up -1.74% to $97.58 a barrel
- Iron ore traded on the Dalian Stock Exchange fell 1.72% to 685 yuan, or 99.30 US dollars.
- Bitcoin, -0.96% to $20,212.57 (from 24 hours ago)
Wednesday (31) features a continuous PNAD scan. The Refinitiv consensus expects the unemployment rate for July to be 9.1%.
In the United States, an ADP survey on job creation in the private sector has been published. The Refinitiv consensus indicates the opening of 288K positions.
8:00 am: Business confidence
9:00 am: PNAD Continuing Survey for July, Refinitiv Consensus Expects Unemployment Rate at 9.1%
9:30 am: Preliminary consolidated public sector result for July, with surplus of R$21.4 billion unanimous on Refinitiv
12:00: Roberto Campos Neto, President of BC, meets with Gustavo Montezano, President of BNDES (closed to the press)
2:30 pm: Weekly FX Stream
Election polls from PoderData, XP/Ipespe, ModalMais/Futura, and Quaest/Genial will be out all day.
United States of America
9:00 a.m.: Speech by Cleveland Federal Reserve Chair Loretta Meester
9:15 a.m.: Special Jobs – ADP
10:45 a.m.: PMI Chicago
11:30 am: Change in Oil Stocks – Environmental Impact Assessment
7:30 p.m.: Atlanta Federal Reserve Chairman Raphael Bostic’s speech
3. Increase CSLL for banks and brokerage firms
The Senate approved the Provisional Measure (MP) increasing by one percentage point in the social contribution over net income (CSLL) for banking and non-banking institutions until December 31, 2022. The measure raised the CSLL for banks from 20% to 21%. For institutions such as brokers and insurance companies, the rate has been raised from 15% to 16%. The text goes to a presidential sanction.
The MP was issued at the end of April this year to compensate for the waiver of Refis (Tax Debt Installment Program) for Individual Small Business owners (Meis) and microenterprises. However, the rate increase went into effect in August because the tax rate increase must comply with the ninety-day (90-day) principle to take effect. The government estimates a revenue increase of R$244.1 million this year with this measure.
Senate approves use of FGHab in Casa Verde e Amarela
This Tuesday, 30th, the Senate approved the Provisional Measure (MP) allowing the use of the People’s Housing Guarantee Fund (FGHab) to fund the Casa Verde e Amarela programme. Since the motion has undergone changes in the chamber, with the approval of the senators, the deputy now goes to the presidential sanction.
According to the text, the resources of FGHab can be used to finance new and used properties. The terms and limits of the fund guarantee will be set out in the FGHab Act, according to the text.
Last Tuesday (30), Brazil recorded 196 deaths and 16,662 cases of coronavirus within 24 hours, according to information from the Media Union, at 8 pm.
The 7-day moving average of deaths from Covid in Brazil is 139, down 20% compared to the level of 14 days before that.
The seven-day moving average of new cases was 14,570, which is an 18% decrease from the previous 14-day level.
The number of people fully vaccinated against Covid in Brazil has reached 170,103,758, equivalent to 79.18% of the population.
180,756,439 people received at least the first dose of vaccines, representing 84.14% of the population.
The booster dose was administered to 1024,0958 people, or 47.67% of the population.
5. Corporate radar
The Economic Defense Administrative Council (Cade), in a court session held on Tuesday (30th), approved the sale of the Isaac Saba Refinery (REMAN) to Ream Participações, by signing an agreement on concentration control – ACC.
The decision will be published in the Federal Gazette in accordance with the term of the CADE regiment and the conclusion of the transaction is still subject to the previous conditions stipulated in the purchase and sale agreement.
Energias do Brasil (ENBR3)
Energias do Brasil (ENBR3), owned by Portuguese EDP, has signed a contract to sell 100% of the share capital of Energest SA, which owns Usina UHE Mascarenhas. The buyer is VH GSEO UK Holdings Limited, a subsidiary of Victory Hill Global Sustainable Energy Opportunities. The company is listed on the London Stock Exchange under the symbol GSEO.
The estimated total value of the transaction is R$1.225 billion, of which R$800 million is at the closing of the operation and the remaining amount is due according to the terms specified in the plant concession renewal process.
IRB-Brasil Resseguros (IRBR3) has entered into an out-of-court agreement with the companies that own and control the Casashopping project located in the city of Rio de Janeiro, whereby these companies have pledged to pay a lump sum of R$100. million to the company, under the terms and deadlines set forth in the aforementioned agreement, with a view to ending litigations between the parties that have been in progress for nearly 20 years, as well as selling the real estate stake to IRB Brasil RE in the project, he said.
The conclusion of the above negotiation process, conducted by the management of IRB Brasil, is part of the strategy to improve the capital structure and organizational indicator to cover the technical provisions of the company.
(Jointly with Estadão, Reuters and Agência Brasil)
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