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  • U.S. Stocks Roar Back After Powell’s Reassurance: Markets Wrap

    U.S. Stocks Roar Back After Powell’s Reassurance: Markets Wrap

    (Bloomberg) -- The S&P 500 Index erased a drop to end the day higher after reassuring comments from Federal Reserve Chairman Jerome Powell on inflation and the outlook for growth spurred traders to buy the dip.The benchmark stock gauge closed 0.1% higher after declining as much as 1.8% amid a rout in technology shares on concern the high-flying stocks had become overvalued. The Nasdaq 100 ended just slightly lower, mostly erasing a loss that reached 3.5% after Powell signaled the Federal Reserve was nowhere close to pulling back on its support for the economy. Airlines, lodging companies and cyclical shares set to benefit from the end of pandemic lockdowns outperformed.So-called growth shares are having their worst month against value counterparts in more than two decades as vaccination campaigns gather pace and bond yields hover near a one-year high. Bets on faster growth have pushed the gap between 5- and 30-year yields to the highest level in more than six years.As Powell reassured investors on stimulus, he voiced expectations for a return to more normal, improved activity later this year and said that higher bond yields reflected economic optimism, not inflation fears. That helped fuel a return of the buy-the-dip mentality that has limited equity drawdows in recent months, with investors betting on a global economic recovery spurred by vaccines and U.S. spending.“There was something in there for everyone today,” Leo Grohowski, chief investment officer at BNY Mellon Wealth Management, said in a Bloomberg TV interview. “Powell did recognize medium-term improvement in the economy but I think laid to rest some percolating inflation fears.”Elsewhere, stocks in Asia were mostly higher as European shares slumped. Bitcoin tumbled below $50,000 after a bout of volatility highlighted lingering doubts about the durability of the token’s rally.Some key events to watch this week:EIA crude oil inventory report is out Wednesday.Finance ministers and central bankers from the Group of 20 will meet virtually Friday. U.S. Treasury Secretary Janet Yellen will be among the attendees.These are some of the main moves in markets:StocksThe S&P 500 Index rose 0.1% as of 4 p.m. New York time.The Stoxx Europe 600 Index fell 0.4%.The MSCI Asia Pacific Index rose 0.1%.The MSCI Emerging Market Index was little changed.CurrenciesThe Bloomberg Dollar Spot Index fell 0.1%.The euro fell 0.1% to $1.215.The British pound rose 0.4% to $1.4114.The Japanese yen fell 0.2% to 105.27 per dollar.BondsThe yield on 10-year Treasuries was little changed at 1.36%.Germany’s 10-year yield jumped two basis points to -0.32%.Britain’s 10-year yield rose four basis points to 0.72%.CommoditiesWest Texas Intermediate crude rose 0.5% to $62.03 a barrel.Gold fell 0.2% to $1,805.81 an ounce.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

  • Brazil Markets Tumble as Bolsonaro Pivots to Interventionism

    Brazil Markets Tumble as Bolsonaro Pivots to Interventionism

    (Bloomberg) -- Brazilian markets plunged on Monday after President Jair Bolsonaro removed the head of state-controlled oil company, the latest sign that his government is rolling back market-friendly policy initiatives to shore up his sinking popularity.Bolsonaro’s decision on Friday to replace the University of Chicago-educated economist at the helm of Petroleo Brasileiro SA after a feud over fuel prices surprised even his inner political circle, according to two government officials familiar with the episode.The real fell 2.4% on Monday, breaching the key level of 5.5 per dollar, even after the central bank stepped into the market with an offer of currency swaps. Petrobras’s shares plunged 19% as analysts from Credit Suisse Group AG to JPMorgan Chase & Co cut their recommendations for the stock over the weekend. Brazil’s Ibovespa stock index declined 5.1%, with state-run companies leading losses.“It’s certainly an indication policy could be headed in the wrong direction,” said Brendan McKenna, a currency strategist at Wells Fargo in New York.There was no room to discuss the move, which shows a president increasingly impatient with the government’s inability to appease his political base, including truckers who have been threatening a strike over rising diesel costs, the people added, requesting anonymity because the discussion isn’t public.The president on Saturday justified his decision by saying the oil company’s current management has shown “zero commitment to Brazil.” Without elaborating, he added that he’s preparing to replace other parts of his administration that “may not be working,” including in the nation’s power sector. On Monday, he told supporters in front of the residential palace that he’s not interfering in the company, but rather demanding “predictability and transparency” from it.Read More: Bolsonaro Calls for More Changes After General Goes to PetrobrasConfidence HitThe move threatens to undermine investor confidence in Latin America’s largest economy at a time its recovery falters amid a second wave of Covid-19. Bolsonaro’s popularity is dropping to near record lows after a program of cash handouts expired in December, with an MDA poll published Monday showing his approval rating fell 8 percentage points to 32.9% over the past four months. That has pushed him to find ways to please his political base to the detriment of the austerity agenda of Economy Minister Paulo Guedes.“That reminds us of other moments of government meddling in economic policy,” said Caio Megale, chief economist at XP Investimentos, recalling a 2013 decision by former President Dilma Rousseff to reduce electricity prices. “The market wants to know if the president’s decision is a new guideline for economic policy.”Economists surveyed by the monetary authority lifted their 2021 inflation forecasts above target and also raised their year-end interest rate estimate for the second straight week. Meanwhile, they cut their 2021 economic growth forecast for the third straight week.James Gulbrandsen, chief investment officer for Latin America at NCH Capital, which has about $3 billion in assets under management, said the uncertainty leaves Brazil at risk of being shunned by investors.“If Bolsonaro interferes with electricity pricing, it’s probably game over for his ability to attract foreign capital,” he said.Roberto Castello Branco, Petrobras’s current chief executive officer, has won investors’ praise by reducing the company’s debt and advocating its independence from the government. General Joaquim Silva e Luna, whose nomination needs to be approved by the state-controlled company board, has been in charge of the Itaipu hydroelectric dam for the past two years, and served as a defense minister in the previous administration.Silent GuedesGuedes has kept silent since Bolsonaro’s announcement on Petrobras because there’s nothing he can say about the decision to make it look better, according to three government officials close to him. Yet he’ll try to minimize investor concerns about political intervention by speeding up the approval of austerity measures in congress, the people said, asking for anonymity because the discussions aren’t public.The economy ministry declined to comment.Guedes has spent the past few days negotiating with lawmakers on the approval of a constitutional amendment that would make room for the government to provide another round of Covid aid to poor Brazilians in exchange for cuts in public spending in coming years. The bill will ensure fiscal credibility and predictability, and talks are going well as there’s an understanding that the country has no time to waste, the people said.Despite losing several political battles recently, Guedes doesn’t intend to step down before leaving an economic legacy he can be proud of, the people added.(Updates with poll of Bolsonaro’s popularity in seventh paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.