Ibovespa Set to End Week Lower After Hawkish BCB Tone

The Ibovespa lost nearly 1% to trade below 179,000 on Friday, as investors digest a more hawkish tone from central banks amid Middle East tensions, with warnings that the conflict could reignite inflation. On Thursday, the BCB delivered a 25 basis point cut, half of the 50 basis point cut previously expected, and warned that war-driven surges in energy and commodity prices are pushing inflation projections away from the 3% target, leaving the rate outlook uncertain. Banks extended losses, with Itaú down over 1% and Bradesco falling more than 0.5%. Utilities also declined, with Sabesp down nearly 1.4%. Other laggards included Ambev, WEG, and Rede D'Or, all down around 1%. In contrast, Petrobras advanced, still benefiting from higher oil prices amid the Strait of Hormuz blockade.

The Ibovespa rose 0.4% to close at 180,271 on Thursday as domestic markets recovered following diplomatic signals that the Middle East conflict could end sooner than anticipated. Sentiment improved as Israeli Prime Minister Benjamin Netanyahu and US President Donald Trump indicated a potential path toward a swift resolution which helped lower future interest rates. These developments provided relief to the banking sector with Banco do Brasil gaining 0.5% and Banco Santander Brazil rising 0.9% while earlier hawkish concerns from the central bank regarding the 3% inflation target persisted. Petrobras edged up 0.4% as oil prices remained elevated despite session lows while Vale fell 0.7% amid broader commodity volatility. High growth and utility names also found support as Equatorial Energia jumped over 3% and Sabesp surged 3.5% as traders recalibrated risk expectations in light of the evolving geopolitical landscape.

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.