Ibovespa Falls on Growth Concerns and Political Risks

The Ibovespa rose 1.3% to close at 179,875 on Monday as markets stabilized following improved global sentiment and a partial retreat in oil prices after tankers successfully transited the Strait of Hormuz. While the index saw volatility earlier in the day reaching past the 181,000 mark it tempered gains as investors digested the latest Focus bulletin which raised inflation expectations for 2026 to 4.10% and the Selic rate projection to 12.25%. Brazil's economic activity as measured by the IBC-Br index grew 0.8% in January which slightly missed market expectations but helped maintain a constructive view on the domestic recovery trajectory. Major players like Petrobras and Vale ended the session in positive territory, bolstered by improved international risk appetite and despite persistent concerns regarding domestic fiscal policy and long-term interest rates.

The Ibovespa rose nearly 2% to trade above 181,000 on Monday, tracking a broad global market recovery as falling oil prices eased inflation concerns. Oil prices declined after some tankers successfully crossed the Strait of Hormuz, reducing fears of a prolonged energy shortage and broader inflationary pressure. Most sectors advanced, with major banks and utilities leading gains: Itaú rose 2.3% and Axia 1.9%. Vale and Petrobras also posted gains of 1.4% and 1.3% respectively, despite softer iron ore and oil prices. Embraer gained 1.5% and Rede D’Or rose 1.7%. In other news, Brazil’s IBC-Br index, a key GDP proxy, rose 0.8% in January. However, market expectations in the Focus bulletin rose for both 2026 inflation to 4.10% from 3.91% and the Selic rate to 12.25% from 12.13%.

The Ibovespa index retreated 0.9% to close at 177,653 on Friday, capping a volatile week as intensifying geopolitical tensions in the Middle East and a strengthening US dollar outweighed the positive domestic momentum from January's services sector growth. While early trading saw gains driven by services activity expanding 0.3% beyond market expectations, the index reversed course as crude oil prices surged back toward $100 per barrel, fueling global risk aversion and prompting a flight to liquidity. Although the Ministry of Finance maintained its 2026 GDP growth projection at 2.3%, the broader market remains burdened by high container costs and the persistent threat of energy-driven inflation, forcing a cautious recalibration of asset valuations as participants await next week’s Federal Reserve and BCB policy meetings.