Brazil Stocks Extend Selloff

The Ibovespa edged lower to trade below 168,000 on Wednesday, extending the previous session’s 2.5% drop that pushed the index to a seven-month low. Crude oil remained volatile amid conflicting signals over a potential US-Iran agreement, keeping inflation concerns elevated. Most financial stocks traded near the flatline, while B3 fell nearly 1% after reporting a 15.5% year-on-year increase in expenses on Tuesday. Banco do Brasil (-0.3%), Rede D’Or (-0.5%), CSN (+1.5%) and Sabesp (-0.3%) are among the scheduled to release their second-quarter 2026 results after the market close. Vale shed more than 1% as iron ore prices declined, while steelmakers posted gains. Petrobras fell 1% as oil prices turned lower. JPMorgan downgraded Brazilian equities to neutral within Latin America on Tuesday, citing weaker growth, deteriorating credit conditions, higher-for-longer interest rates and increased volatility ahead of the presidential election. The bank also lowered its year-end Ibovespa target.

The Ibovespa tumbled 2.5% to close at 167,875 on Tuesday, its lowest close since January 20th and the sharpest decline since March 12th. JPMorgan downgraded Brazilian equities to neutral within Latin America, citing weaker growth, deteriorating credit conditions, higher-for-longer interest rates, and increased volatility ahead of the presidential election. The bank also cut its year-end Ibovespa target. In its minutes, Copom said inflation remains pressured by demand and requires a restrictive monetary policy stance. July's inflation reading also added to concerns, coming in slightly above forecasts. Political risk also rose after a new election poll showed President Lula widening his lead over Flávio Bolsonaro, as investors remain focused on the potential fiscal direction of the next government. Banks fell sharply, with Banco do Brasil down 3.7%, Bradesco losing 2.3%, and Itaú shedding 3.5%. Petrobras fell 1.3% despite higher oil prices, while Vale declined 2%.

The Ibovespa edged down to trade below 172,000 on Tuesday following the release of July’s inflation data and the minutes from Copom’s latest meeting. Brazil’s annual inflation rate eased to 4.44% in July 2026 from 4.64% in June, in line with forecasts and returning to within the central bank’s 1.5%-4.5% target range. In the minutes, the monetary authority said that although monetary policy is making a decisive contribution to the disinflation process, inflation remains pressured by demand, requiring a restrictive policy stance. Financials traded mostly lower, with Caixa extending losses by nearly 3% after reporting a 0.2% quarter-on-quarter decline in adjusted net income and a 0.8% year-on-year drop in financial income. BTG fell more than 2% despite reporting its strongest semester on record. B3, down 0.3%, is set to release its results later today. Petrobras shed nearly 0.5% as the oil rally lost momentum. Vale gained more than 0.5% as iron ore prices rose on signs of tighter supply.