Shares of Magalu (MGLU3) jump 24% and Casas Bahia (BHIA3) rise 11%, leading Ibovespa gains

One session after repercussion of the balance sheet for the third quarter of 2023 (3Q23), which was overshadowed by accounting inaccuracies that affected its net worth by around R$830 million, the shares of Magazine Luiza (MGLU3) had a wild day. Assets jumped 24.43%, to R$2.19, in this Thursday’s session (16); in the month, gains are close to 65%.

Part of the rise can be explained by the new session of relief in future interest rates, which also boosted the shares of other retailers and consumer companies, such as Casas Bahia (BHIA3R$ 0,58, +11,54%).

DI rates continued this Thursday their most recent downward movement, in line with the closing of the interest curve in the United States, after the release of new labor market data, and with the indication that the Lula government will maintain the target of zero primary result for 2024.

In the last ten sessions, future interest rates fell in seven of them, were close to stability in two and rose in only one. On the return of the holiday in Brazil, DIs (Interbank Deposits) continued to react to the most recent data on the North American economy.

On Tuesday, future rates had already plummeted after the Labor Department released favorable numbers on US inflation.

On Wednesday, the Commerce Department reported that retail sales fell 0.1% in October, compared with a 0.9% rise in September. The Department of Labor reported, also on Wednesday, that the producer price index for final demand (PPI) fell 0.5% in October, the biggest drop since April 2020. This Thursday On Friday, the Department of Labor revealed that initial claims for unemployment benefits increased by 13,000 in the week ending November 11, to a seasonally adjusted 231,000.



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Internally, the news also brought some relief to concerns about fiscal balance, which favored the reduction of premiums in the forward curve. The Secretary of Economic Policy of the Ministry of Finance, Guilherme Mello, stated late in the morning that the economic team maintains the objective of bringing the primary deficit to a level close to zero in 2024. The rapporteur of the Budget Guidelines Law (LDO), deputy Danilo Forte (União-CE), said that his report will bring a target of zero primary deficit in 2024 and that the government maintains this objective for next year.

Despite the signals about maintaining the target, the chief economist at Azimut Brasil Wealth Management, Gino Olivares, assessed in a comment sent to clients that the government “has little desire to control expenses, but it will be difficult to avoid making some degree of contingency, at the risk of completely demoralizing the framework he himself promoted.”

Even with the most recent drops, the forward curve continues to price cuts of just 0.50 percentage points in the Selic base rate in the next two Central Bank monetary policy meetings, in December and January, as has been signaled by the autarchy itself. Close to closing, the forward curve priced the chances of the Selic cut in December at 97% at 0.50 percentage points. The chances of a cut of just 0.25 percentage points were priced at 3%. Currently, Selic is at 12.25% per year.

At the end of the afternoon, the DI rate for January 2025 was at 10.5%, compared to 10.546% of the previous adjustment, while the DI rate for January 2026 was at 10.21%, compared to 10.278% of the previous adjustment. Among longer contracts, the rate for January 2027 was at 10.34%, up from 10.411%, while the rate for January 2028 was at 10.59%, up from 10.649%. The contract for January 2031 marked 10.97%, compared to 11.019%.

At 16:39 (Brasília time), the ten-year Treasury yield US10YT=RR – global reference for investment decisions – fell 9.40 basis points, to 4.4433%.

Looking specifically at the company, in a technical analysis report during the afternoon, Itaú BBA highlighted recommending the purchase of MGLU3 based on the following points:


“MGLU3 surpassed important resistance at 2.08. With this movement, the asset begins an upward trend in the short term and has next objectives at R$2.70 and R$3.50”, he points out.

If it is realized, MGLU3 will find support at R$1.55 and R$1.40. “As a result, we recommend positioning the stop loss slightly below R$1.38”, highlighted the analysis.

(com Reuters)


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