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Why Brazil’s Service Activity Weakened in March

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Brazil’s service purchasing managers’ index

According to Markit Economics, Brazil’s service PMI (purchasing managers’ index) fell in March, to 50.4 from 52.7 in February. Brazil’s (EWZ) service PMI rose for a second straight month in March, mainly driven by the following factors:

  • Production volume and output improved at a slightly higher rate.
  • New business orders rose to a five-year high and export orders rose strongly.
  • Employment in the service sector continued to decline.

Overall business sentiment in the service sector reached a six-month high in March. With the expectation of political and economical improvement in Brazil, businesses are becoming optimistic about the country’s outlook.

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Market impact

In the previous part of this series, we discussed how the iShares MSCI Brazil Capped ETF (EWZ) and the Direxion Daily MSCI Brazil Bull 3X ETF (BRZU), which track Brazil’s economy, fell strongly in March. Selling pressure in global equity markets due to growing global trade war concerns dragged down these ETFs. The First Trust Brazil AlphaDEX ETF (FBZ) also fell, by 6.2%, in March. In the next part of this series, we’ll analyze China’s manufacturing PMI in March.

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