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How Brazil’s Services PMI Trended in February

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Brazil’s services PMI in February 2018

According to a report by Markit Economics, the final Brazil services PMI (purchasing managers’ index) rose solidly in February 2018. The metric stood at 52.7 in February as compared to 50 in January 2018. It was the highest expansion in the service sector since January 2013.

February’s services PMI was the highest improvement in the past five years. Brazil’s (EWZ) services PMI in February was mostly due to the following factors:

  • Production volume and output improved at a higher rate in February 2018.
  • New business orders and export orders also rose solidly in the same month.
  • Employment in the service sector fell marginally in the same month as businesses started cost-reduction processes.
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The overall improvement in both manufacturing and services activity is signaling that businesses are optimistic about the country’s short-term economic outlook. Investors seem to expect the country will soon have a favorable political environment, which is strengthening the business confidence index. On the other hand, the domestic client demand is also improving. When an economy shows structural changes in its political and economic environment, it generally provides an opportunity in its equity market.

Market impact

In the previous part, we saw that major ETFs that track the performance of Brazil such as the iShares MSCI Brazil Capped ETF (EWZ) and the Direxion Daily MSCI Brazil Bull 3X ETF (BRZU) fell significantly in February 2018. The overall selling pressure in the global equity market dragged down the performance of these ETFs. The First Trust Brazil AlphaDEX ETF (FBZ) fell marginally by 0.01% in the same month.

In the next part of this series, we’ll analyze the performance of China’s manufacturing PMI in February 2018.

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