Ibovespa Plunges as BCB Rate Cut Comes Below Forecasts

The Ibovespa fell 1.5% to the 177,000 mark on Thursday as the Middle East conflict and its inflation fallout drove the Brazilian central bank to abandon its guidance of rate cuts this year. The BCB delivered a 25bps, half of the earlier consensus of 50bps, and warned that war-driven energy and commodity price surges are pushing inflation projections away from the 3% target, prompting an uncertain rate outlook. Major banks posted losses, Itaú shed over 1.6%, Bradesco over 2.6%. Utilities followed, with Axia losing 2.4%. Also, Vale dropped over 3% as Chinese iron ore prices fell after state buyer restrictions eased. In contrast, Petrobras gained over 1% as oil prices extended their rally. Elsewhere, Eneva rose nearly 2% after winning 5 GW in an auction and announcing R$18.2 billion in new gas hub investments.

The Ibovespa fell 0.4% to close at 179,640 on Wednesday as investors processed the Federal Reserve's hawkish hold and pivoted toward the imminent Selic rate decision. While the Fed maintained its 3.5%–3.75% range, the focus shifted to whether the Copom will implement a 0.25 pp or 0.50 pp cut amid escalating regional tensions that pushed the commercial dollar toward R$ 5.20. Rising future interest rates and government threats to block companies violating freight rate guidelines weighed on the index despite a 2.2% gain for Petrobras following new gas reserve discoveries. Resource heavy stocks remained a drag as Vale fell 2.4% on declining iron ore prices and higher shipping costs while banking majors Bradesco and Banco do Brasil dropped over 1%. As global markets grapple with the effective closure of the Strait of Hormuz, the Brazilian market reflects deep uncertainty over how local authorities will balance growth against the 0.7% surge in US producer inflation.

The Ibovespa edged below 180,500 on Wednesday as investors awaited the new Selic rate announcement, which may signal how authorities are weighing growth and inflation risks amid the Middle East conflict. Markets expect the first rate cut since May 2024, though caution is likely given escalating geopolitical tensions. Rising oil prices amid supply disruption in the region lifted inflationary pressures, raising concerns over higher bond yields and lower credit demand. Banking stocks fell, with Bradesco down 1% and Itaú down 0.6%. Also, Vale lost 1% as iron ore prices declined on higher freight rates hindering steel exports. Meanwhile, Petrobras rose 1% on higher oil prices and news of a new gas reserve discovery.