Ibovespa Struggles for Direction

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.

The Ibovespa index rose nearly 1% to above the 180,500 mark on Friday as a favorable domestic services sector report and declining future interest rates offset global macroeconomic instability stemming from the Middle East conflict. January services sector growth of 0.3% exceeded expectations and helped alleviate investor anxiety regarding a potential economic slowdown, while a downward shift across the future interest rate curve provides relief for domestic credit-sensitive equities. Although the US release of PCE inflation data confirmed price pressures remain above target, the market found support as US oil futures moderated, which helps diminish the immediate outlook for energy-driven cost push inflation in Brazil. The Ministry of Finance maintaining its 2026 GDP growth projection at 2.3% further stabilizes the outlook despite global supply chain hurdles such as rising container costs. Retail and financial sectors led the recovery.

The Ibovespa index plunged 2.6% to close at 179,284 on Thursday as geopolitical tensions in the Middle East drove oil prices back above 100 dollars per barrel. Investors retreated from risk assets following threats to shipping in the Strait of Hormuz and failed attempts by the IEA to stabilize energy supplies. In response to rising fuel costs the Brazilian government announced the elimination of PIS and Cofins taxes on diesel to cushion consumers. Sentiment remained fragile as February consumer prices exceeded expectations and stoked fears regarding the persistence of inflation ahead of the upcoming interest rate decision. Broad selling hit major sectors with banks falling over 2% and industrial names like Embraer recording double digit losses. While Petrobras shares saw modest gains the market continues to grapple with the economic uncertainty of a prolonged conflict that threatens to dampen growth and force a more cautious stance from the monetary authority.