Analysts at Rabobank note that Brazilian assets had a mixed performance in a volatile week both external and domestically.
Key Quotes
“Country risk (5-year CDS) rose a bit further (+4bps to 241bps), as EM credit spreads widened. Local rates rallied in front end, belly (c. 20bps); Ibovespa stock index edged down (0.4%).”
“The BRL stood among the underperformers among 35 of the major currencies, losing 1.4% to 3.91/USD (EM, Commodity FX down 0.2-0.4% for the week). Political concerns are back, as the presidential campaign has started with a still unclear outcome seen from now. That keeps a perception of high uncertainty about the execution of key economic reforms in 2019.”
“Economic data out recently reaffirmed the fading effects of the truckers’ strike in real activity. Yet we not only look for a weak Q2 GDP, but also see downside risks for the pickup we have pencilled in for 18H2. Odds skewed to downside for our 2018 GDP forecast (+1.3% currently).”
“The week’s thin macro calendar highlights August IPCA-15 inflation preview (Thu.). We project a 0.10% m/m gain, taking the annual reading down to 4.3 y/y (from 4.5% y/y in July).”
“In politics, local markets will focus on a number of electoral surveys out in coming days, such as Ibope (due from Monday onwards) and Datafolha (due from Wednesday onwards).”
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