On Monday, April 7, 2025, the Ibovespa index, Brazil's main stock market indicator, experienced a significant downturn, dropping 2.16% to 124,376 points by 11:03 AM (Brasília time). This decline was marked by widespread losses across all stocks within the index, reflecting growing fears of a global recession triggered by escalating trade tensions.
The market's anxiety stems from the recent implementation of tariffs by the United States, aimed at addressing its trade deficits with various countries, including China and the European Union. As a result, the Nasdaq index in the U.S. plummeted nearly 5%, signaling a broader concern about economic stability.
"The tariffs from the United States have come into effect, and many are afraid of a global recession," noted Jefferson Laatus, chief strategist at Grupo Laatus. This sentiment was echoed globally, as the Chinese stock index Shanghai fell by 7.34%, while the Hong Kong market experienced its most significant one-day drop since 1997, plunging 13.22%.
Investors are particularly wary of the potential repercussions of the U.S. tariffs, which were announced on April 2 and took effect on April 5. These tariffs include a 34% levy on imports from the U.S. imposed by China in retaliation, escalating the trade war and compounding fears of a global economic slowdown.
The impact of these tariffs has already been felt significantly, with U.S. companies losing approximately $6.09 trillion in market value over just two days following the announcement. As markets reacted to the news, the European stock exchanges also saw sharp declines, with the Euro Stoxx 50 index dropping by 3.87% and Germany's DAX falling by 4.09%.
On the commodities front, oil prices fell by over 1% on the same day, while iron ore prices dropped 3.29% in Dalian, China. These declines are attributed to fears that the ongoing trade tensions will dampen global demand for raw materials.
The Brazilian real weakened against the dollar, which rose by 0.43% to R$ 5.8891. This increase in the dollar's value is partly due to the ongoing risk aversion among investors, who are increasingly worried about the implications of the U.S. tariffs on the global economy.
In the Brazilian stock market, notable declines were observed among major companies. Shares of Magazine Luiza and GPA fell by 4.43% and 4.33%, respectively, although both companies have seen significant gains over the past month, with Magazine Luiza up 31.81% and GPA up 24.5% in the same timeframe.
Meanwhile, BRB shares led the market declines, falling 8.17% for common shares and 16.73% for preferred shares. The recent downgrade by Fitch Ratings, which placed BRB and Master Bank's ratings under observation due to ongoing uncertainties surrounding their merger, has contributed to this decline.
Gilberto Cardoso, CEO of Tarraco Commodities, commented on the situation, stating, "Despite the recovery of Chinese steel margins and reduced inventories, the macroeconomic environment has deteriorated due to the increase in tariffs between the U.S. and China." He added that even though there are signs of demand recovery for steel in China, the outlook remains bleak due to anticipated lower global growth.
The outlook for the Ibovespa remains cautious, with the EWZ, an exchange-traded fund that tracks Brazilian stocks in New York, falling 3.06% in pre-market trading, indicating a challenging day ahead.
Furthermore, the Brazilian Central Bank's Focus Bulletin, released on the same day, maintained its inflation forecast for 2025 at 5.65%, which is above the target ceiling of 4.50%. The Selic rate is expected to remain stable at 15% for 2025, with projections for subsequent years also reflecting a cautious approach to monetary policy amid economic uncertainty.
In political developments, President Luiz Inácio Lula da Silva announced plans for the expansion of Novo Nordisk's factory in Montes Claros, Minas Gerais, as part of his government's efforts to stimulate economic growth. He was accompanied by Finance Minister Fernando Haddad during this announcement.
As the situation continues to evolve, the markets remain on edge, with many investors watching closely for any signs of a resolution to the trade tensions that have caused such widespread turmoil. The potential for retaliatory measures from China and the impact on global supply chains are key factors that will likely influence market behavior in the coming days.
In summary, the ongoing trade war and its implications for the global economy are at the forefront of investor concerns, leading to significant volatility in markets worldwide. The Ibovespa's decline is a reflection of these broader economic fears, and the coming weeks will be critical in determining whether the situation stabilizes or worsens.
