Ibovespa Weighed by Hawkish Selic Outlook

The Ibovespa fell more than 0.5% to 175,000 on Thursday amid the outlook of high interest rates and renewed geopolitical tensions. Oil prices rebounded after Iran said it had attacked a US air base in response to fresh US strikes, reviving stagflation fears and pushing bond yields higher globally. Also, the IGP-M rose 0.84% in May, slightly above forecasts, while Citi raised its year-end Selic forecast to 13.75% from 13.25%. Meanwhile, the national unemployment rate was at 5.8% in the April moving quarter, below market expectations and the lowest in the period on record. Consequently, rate-sensitive stocks weighed on the index, with Itaú down more than 1% and Bradesco losing nearly 1%. Vale shed over 0.5% on lower iron ore prices, while Petrobras rose 0.4% as oil prices advanced.

The Ibovespa lost 0.5% to close at 175,744 on Wednesday as investors assessed Brazil’s latest inflation data and monitored developments in the Middle East. Brazil’s mid-month inflation rose to 4.64% in May from 4.37% in April, above forecasts of 4.55%, reinforcing expectations that the central bank may keep interest rates elevated for longer. Meanwhile, prospects for a US-Iran deal to end the war and restore energy flows through the Strait of Hormuz remained uncertain. The US denied an Iranian media report on a draft interim agreement stating that traffic through Hormuz could return to normal within a month after the deal takes effect. Still, oil prices declined, weighing on Petrobras, which fell 1.4%. Utilities also traded lower, with Axia down 1.8%. Other notable laggards included B3 (-2.7%) and Rede D'Or (-1.7%). Major banks helped limit losses, with Bradesco up 0.9% and Itaú gaining 0.6%. Embraer rose 1.5% after Bradesco BBI reiterated its buy recommendation on the stock.

The Ibovespa traded little changed above the 176,000 mark on Wednesday as investors assessed Brazil’s latest inflation data and monitored developments in the Middle East. Brazil’s mid-month inflation rate rose to 4.64% in May from 4.37% in April, above forecasts of 4.55%, reinforcing expectations that the central bank may keep interest rates elevated for longer. Meanwhile, oil prices moved lower on optimism that the US and Iran could eventually reach a peace agreement despite renewed hostilities and uncertainty surrounding the Strait of Hormuz. Easing energy-driven inflation concerns supported banks, with Itaú and Bradesco rising more than 1.5%. WEG also advanced, while Ambev gained 1% after Brazil’s industrial confidence rebounded to the highest level in one year. Vale added 1% despite lower iron ore prices, while Petrobras lost nearly 2% on falling crude prices.