Ibovespa Falls on Selic Rate Outlook

The Ibovespa fell 0.4% to close at 175,063 on Thursday, pressured by expectations of higher interest rates. Brazil’s IGP-M rose 0.84% in May, slightly above forecasts, while Citi raised its year-end Selic rate projection to 13.75% from 13.25%. Meanwhile, the unemployment rate fell to 5.8% in the rolling quarter through April, below market expectations and the lowest reading for the period on record. Rate-sensitive stocks weighed on the index, with Itaú down 0.8% and Bradesco losing 0.6%. Petrobras also declined 0.7% on expectations of normalization of the oil flow in the Strait of Hormuz amid reports that the US and Iran agreed on a proposal to extend their ceasefire, pending approval from the US president.

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.