Volatility sets the tone in the markets – 04/11
Since the announcement of import tariffs by the United States last week, assets have faced great volatility, both due to uncertainties regarding the prospective global economy and the intense news of the last few days. Highlights this week include the rise in trade tensions between the US and China, which intensified asset volatility but reinforced the dynamics of a weaker dollar, and the pause in tariff policy for other countries, which reduced the likelihood of a global recession – even though there is a recession and pressured inflation in the US.
On the data side, current inflation in the United States surprised on the downside in March, but the outlook is for this scenario to worsen – according to the trade situation and according to consumers themselves. Last month’s CPI result showed a slowdown in practically all major categories, with the exception of food, which remained under pressure. The PPI, on the other hand, brought an even greater bearish surprise (-0.4% m/m vs est. 0.2%), turning negative for the first time since October 2023. In any case, the FOMC minutes reinforced the uncertainties regarding the effects of the tariff policy, increasing the upside risks for inflation, although it remains dependent on the data given the high uncertainty. In the same sense, Michigan consumer confidence fell sharply (50.8 vs est. 53.5) in the April preview, with 1-year inflation expectations jumping to 6.7% y/y (from 5.0% in March).
In Brazil, assets reacted mainly to the external environment, but important data were released, with emphasis on the IPCA – which brought a negative message for the dynamics of consumer inflation. The IPCA for March was above the consensus expectation (0.56% m/m vs est. 0.53%), also reflecting an unfavorable composition of the index. In the same vein, it is important to highlight the bullish surprise of the Services Volume in February, with a more positive performance due to a widespread increase among openings, which reinforced the increase in domestic activity, although it went in the opposite direction of the Retail Sales, which was below expectations. Thus, we reinforce our expectation of a very gradual slowdown in the economy.
For more details, please check our Weekly Report 108.
