Ibovespa Falls as Strong GDP Boosts Hawkish BCB Bets

The Ibovespa lost 0.7% to close at 173,787 on Friday as stronger-than-expected GDP data reinforced the view that the current cycle of Selic rate cuts may be limited. Brazil’s economy grew 1.1% in the first quarter from the previous three months, accelerating from a 0.3% expansion in Q4 2025 and marking the strongest quarterly growth since Q1 2025. The data strengthened expectations of a hawkish BCB, pushing bond yields higher and weighing on equities. Banks led losses, with Bradesco down 1.1% and Banco do Brasil shedding 1.5%. Petrobras fell 1.2% as oil prices retreated after a deal to extend the US-Iran ceasefire renewed hopes for an end to the Middle East conflict. Vale also lost 1.4% despite higher iron ore prices.

The Ibovespa shed nearly 1% to trade below 174,000 on Friday as robust GDP data reinforced the outlook of a hawkish BCB. Brazil’s economy grew 1.1% in the first quarter of 2026 from the previous quarter, the fastest pace in one year, fueling expectations that Central Bank of Brazil will leave rates higher for longer to tackle the high level of inflation. Banks posted led losses, with Itaú, Bradesco, and Santander down around 1%. Utilities also posted sharp declines, with Axia and Sabesp losing nearly 2%. Meanwhile, Petrobras fell over 1% as oil prices retreated on renewed hopes for a US-Iran peace deal after both sides agreed on a framework pending approval from US President Donald Trump. Other notable laggards included Ambev (-1.2%) and WEG (-1%).

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.