Brazil Stocks Rise Despite Mixed Earnings

The Ibovespa edged up to trade above 174,000 on Thursday as investors assessed another round of corporate earnings. Vale (+2%) is set to report second-quarter results after the market close. Other notable performers included Axia (+1.5%), WEG (+1.5%) and Rede D'Or (+2%). Ambev fell 3% despite posting stronger second-quarter net income, as revenue and EBITDA missed market expectations. Santander Brasil slipped 0.6% after disappointing second-quarter results prompted JPMorgan to downgrade the stock to Neutral. Meanwhile, Bradesco dropped 3% after announcing a capital increase of up to R$10 billion, with controlling shareholders committing to subscribe up to R$8 billion. On the data front, Brazil's unemployment rate fell to 5.4% in the quarter ending in June, reinforcing signs of a resilient labor market. Recent BCB communications have highlighted greater upside than downside risks to inflation, suggesting the current interest rate-cutting cycle may soon pause.

The Ibovespa fell 1.5% to close at 173,885 on Wednesday as investors digested stronger-than-expected Brazilian labor market data and the Fed's policy decision. Brazil created a net 145,161 formal jobs in June, above market expectations of 115,000, reinforcing the resilience of the labor market and supporting expectations of a more hawkish BCB. The Fed left interest rates unchanged, as expected, though three FOMC members favored a rate hike, adding to concerns that global interest rates could remain higher for longer. Financials declined, with Itaú down 2.4%, Bradesco losing 2.2%, Itaúsa shedding 2%, and B3 falling 4.2%. Santander tumbled 6.9% after missing ROE expectations. Sabesp dropped 6% after the meeting to vote on its proposed merger with Emae was postponed. Ambev erased earlier gains to close 1.2% lower following its earnings-driven rally. Vivo and TIM extended losses, falling 3.8% each on weak operating results. Meanwhile, Petrobras gained 1.9% on higher oil prices.

The Ibovespa fell nearly 1% to trade below 175,500 on Wednesday amid fresh Middle East tensions, while markets eased exposure to risk ahead of a Federal Reserve decision. Oil prices rose after joint US-Saudi strikes in Iraq, fueling inflation concerns. The Fed is expected to leave rates unchanged, although hawkish statements from FOMC members supported possible dissents for a hike. Financials led the decline, with Itaú, Bradesco, and Itaúsa down about 2%, while Santander tumbled 7% after missing ROE expectations. Utilities also weakened, with Axia down more than 1% and Sabesp losing 2%. Ambev erased earlier gains to trade slightly lower after surging as much as 16% on strong profit and EBITDA. WEG (-1%) and Rede D'Or (-2.5%) also declined. In contrast, Petrobras gained nearly 2.5% on higher oil prices and after Morgan Stanley reaffirmed its Overweight rating, citing expectations of strong second-quarter results following the company's production update.