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(Bloomberg) -- New forecast is explained by Copom’s post-meeting communiqué, that “highlighted ‘uncertainties’ and strongly signaled a slower cutting pace ahead, reflecting a more cautious BCB", according to a report signed by Nomura’s economist Joao Pedro Ribeiro after Brazil Central Bank’s decision to cut benchmark Selic rate by 100bps to 10.25%.

• Central Bank’s statement that followed last night decision “was the BCB’s first chance to elaborate on its approach and framework under the current political crisis that began on 17 May which dramatically lowered the predictability of economic scenarios”
  • “In the weeks between now and the 26 July meeting, Brazil can easily have a different president and changing prospects for the (very relevant) fiscal reform”
  • BCB used the word “uncertainty” five times in the statement, “highlighting that its own inflation forecasts, the prospective inflation trajectory and economic activity outlook have all become less certain”
  • BCB have indicated that the likely net result of the current uncertainty is less room for cutting, “despite the downside risks to activity”
• Ribeiro cites three elements from last night communiqué as “particularly relevant” and that led Nomura to revise its forecast for Selic at end of 2017: “the explicit reference to slowing the pace in July”; BCB’s 2018 inflation forecasts revised up to 4.60% y/y from 4.50%; and BCB recognition that the "current uncertainty ’hinders the faster fall of structural interest rate’, which is an important factor to gauge the overall size of the cycle”
• Following last night statement, “we reaffirm our expectation of a 75bp cut in July”: Ribeiro
  • “We also recognize the fluidity of the economic and political scenarios, which are currently highly unpredictable and can quickly change the fine tuning of monetary policy”

To contact the reporter on this story: Leonardo Lara in Sao Paulo at llara1@bloomberg.net To contact the editors responsible for this story: Daniela Milanese at dmilanese@bloomberg.net Danielle Chaves

(Bloomberg) -- “We view positively the clarity and candid nature of the central bank’s guidance and for adopting what we view as a cautious and prudent stance in the face of rising uncertainty”, says Alberto Ramos, Goldman Sachs’ chief economist for Latin America, in a report after Copom’s decision to cut benchmark Selic rate by 100bps to 10.25%.

• “The policy statement and the forward guidance turned more hawkish and conservative: the easing cycle will continue, but given rising uncertainty likely at a lower pace”, says Ramos about the statement that followed last night decision
  • “Overall, the bank is still comfortable with the outlook for inflation but is particularly concerned about the impact of the recent increase in policy and political uncertainty on the outlook for reforms, the economy, and inflation”
  • “Furthermore, heightened uncertainty makes the central bank less comfortable about the accuracy/precision of its conditional forecasts. In this case, the central bank should err on the side of being conservative”
• “From this conservative standpoint, we believe it will be a lot easier and from a credibility standpoint safer to eventfully guide the market to expect a larger cut than the 75bp hinted today for the July meeting, were the current level of uncertainty to dissipate quickly and the outlook for reforms to improve”

To contact the reporters on this story: Leonardo Lara in Sao Paulo at llara1@bloomberg.net; Vinícius Andrade in São Paulo at vandrade3@bloomberg.net To contact the editors responsible for this story: Daniela Milanese at dmilanese@bloomberg.net Danielle Chaves

(Bloomberg) -- BTP generic contract may see opportunistic sellers step in after momentum rolls over and market erodes the bullish trendline from mid-March, Bloomberg technical analyst Sejul Gokal writes.

• See chart; IKM7 -45 ticks to 132.70
• While broader trend upholds its bullish structure (market above daily cloud), near-term outlook deteriorates further after Wednesday’s break below the 11-week uptrendline and Thursday’s follow-through selling
• Momentum flagging, with daily MACD breaking its fast uptrendline while negative histogram hits multi-week lows
• Potential support objectives at 131.56-42 (38.2% Fibonacci, 55-DMA) and 130.80-78 (50% retracement, 100-DMA)
  • Close above 133.48 negates downside view
• Investors have recently dumped Italian stocks and debt after ruling Democratic Party leader Matteo Renzi signaled the possibility of a vote in September or October, more than six months ahead of schedule

• NOTE: Sejul Gokal is a technical strategist who writes for Bloomberg. The observations he makes are his own and are not intended as investment advice.

(Bloomberg) -- PPG says it will not pursue a public offer for all the issued and outstanding shares of Akzo Nobel, according to statement on Thursday.

• PPG says made final decision today after “careful consideration, including the stakeholder interests of both companies”
• “We were hopeful throughout this process that Akzo Nobel’s boards would see merits of our compelling proposal to combine our two great companies and create significant shareholder value and a more sustainable business for the future,” said PPG CEO Michael McGarry
• PPG made final attempt for engagement late last week and through a letter to Akzo Nobel
  • Letter included offer to negotiate a nominal price increase as part of an agreed transaction: PPG
  • Akzo Nobel did not respond to “our call or letter” 

• NOTE: PPG Faces June 1 Deadline on Akzo Bid After Extension Denied 
• Link to Statement:Link