A wave of panic swept through financial markets on Monday (5), with stocks plummeting in the United States and around the world as investors focused on signs of a slowing American economy and a possible recession looming.
The decline followed the release of the U.S. jobs report on Friday (1), which showed significantly slower hiring, with unemployment rising to its highest level in nearly three years. This deepened fears that the world’s largest economy may be heading into recession and that the Federal Reserve may have waited too long to cut interest rates.
In light of the weak U.S. jobs report, Goldman Sachs said in a note that it now expects the Fed to cut interest rates at its next three meetings — in September, November, and December. At its meeting last week, the Fed maintained the interest rate, the highest in two decades, where it has remained for a year.
Goldman analysts raised their forecast for the probability of a recession in the U.S. over the next 12 months to 25% from 15% previously.
Dollar soars in Brazil
In Brazil, the dollar rose to its highest value since October 2020, amid the Covid-19 pandemic.
Around 12:05 PM, the commercial dollar had appreciated by 1.03%, selling at R$ 5.767. During the first part of the day, it even surpassed R$ 5.826.
Besides the fear of recession in the United States, the Brazilian market is also affected by rising interest rates in Japan. As the Eastern country had the lowest rate in the world, many investors were borrowing money there and then investing in Brazil, which has the second highest interest rate on the planet. This money is now leaving the country.
Source: The New York Times and Uol