Ibovespa Slips as Labor Market Holds Firm

The Ibovespa edged lower to trade below the 171,500 mark on Friday as investors assessed Brazil’s latest labor market data. The unemployment rate fell slightly to 5.6% in the rolling quarter ending in May, matching forecasts and holding at the lowest level in the historical series. The resilience of the labor market reinforced expectations that the BCB may keep interest rates elevated for longer. Major banks traded lower, with Itaú down more than 0.5% and Bradesco losing nearly 1%. Petrobras also fell 1% as oil prices returned to pre-conflict levels amid easing supply concerns, with more tankers leaving the Strait of Hormuz. This came despite Iran reaffirming its control over shipping in the Strait and warning Gulf states against siding with the US, a day after an attack on a vessel near Oman highlighted the fragility of the preliminary peace deal. Meanwhile, meatpackers extended gains, with MBRF rising more than 2.5%.

The Ibovespa rose 0.9% to close at 171,990 on Thursday, as investors reacted positively to softer-than-expected inflation data and fresh guidance from the BCB. Brazil’s mid-month inflation slowed more than forecast in June, while the BCB sought to clarify its latest 25 basis-point Selic cut and stressed that future decisions remain data-dependent. The softer inflation print and lower oil prices pushed the yield curve lower. Major banks traded mixed, with Banco do Brasil up 1.6%, Itaú rising 1.7%, while Bradesco edged down 0.2%. Vale rose 1.1%, recovering from recent losses. Petrobras gained 0.5% as oil prices edged up despite improving shipping flows through the Strait of Hormuz. Meanwhile, Braskem plunged 10.4% after creditors rejected its restructuring proposal.

The Ibovespa gained near 0.5% to trade above the 171,000 mark on Thursday as investors digested inflation data. Bond yields moved lower after June's mid-month inflation reading came in below market expectations, reinforcing bets that price pressures may be easing. Adding to the decline in yields, oil prices erased all gains accumulated during the Iran conflict as shipping flows through the Strait of Hormuz increased. Major banks traded higher, with Itaú, Bradesco, and Banco do Brasil up around 2%. Utilities also advanced, with Axia and Sabesp gaining nearly 2%. Other notable performers included WEG (+1%), Rede D'Or (+1%), and Embraer (+2%). Markets also assessed the BCB’s monetary policy report, which revised GDP growth forecasts higher and more directly flagged concerns over government stimulus measures. On the downside, Braskem gained 0.6% despite filling for emergency protection against creditors as talks for an out-of-court solution to its mounting debt woes hit snags.