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In view of analysts at Rabobank, last week Brazilian assets underperformed EM peers for most classes (with notable exception of fixed income), reflecting a high-beta pattern amid a global risk-off.

Key Quotes

“It seems that constructive conjectures about the next government’s economic policy and ability to pass reforms have already been largely incorporated into local asset prices. If so, new developments (especially on reforms) will be necessary to generate more thrust.”

“The announcement of further names for the economic policymaking team (and surroundings) have been welcomed by investors, as they signal a technical profile and reaffirm commitment with privatizations and deregulation, key elements to stimulate new investment.”

“Despite the positive news on the policy front, the pension reform (mother of all reforms) is still the main conditioner of upcoming scenarios for Brazil. In this area, execution risks still seem relevant and political negotiations will have to intensify as soon as possible.”

“On the economic front, data last week showed a gradually improving picture in formal jobs and a possible sign of u-tern in the deterioration of business confidence (more data required).”

“This week’s calendar features Q3 GDP report (Fri.). We look for a headline growth of 0.9% q/q (3.7% annualized) and 1.7% y/y, meaning the fastest sequential pace since 17Q1.This result is likely influenced by one-off factors, yet the numbers remain consistent with a gradual economic recovery. The latter could see a pick-up if fiscal risks are wiped out via reforms.”