Ibovespa Inches Up on Easing Inflation

The Ibovespa inched above the 175,000 mark on Friday, as fresh evidence of disinflation strengthened the outlook of lower rates by the BCB. Producer prices rose 1.94% from the previous year in July, slowing from a 2.47% increase in June, and the IGP-M fell from the previous month. Signs of easing inflationary pressures supported credit-sensitive stocks as yields softened. Financials advanced, with Bradesco up 1%, Banco do Brasil gaining more than 1%, and Santander rising nearly 2%. B3 gained nearly 2% after JPMorgan said emerging-market equity funds recorded higher inflows, with Latin America returning to positive territory. Brazil also recovered after four weeks of heavy outflows. Petrobras rose more than 0.5% after Bradesco BBI upgraded the stock to Outperform from Neutral.

The Ibovespa added 0.3% to close at 175,135 on Thursday, supported by gains in the energy and mining sectors. Crude prices moved higher after the US and Iran traded recriminations over Washington’s pledge to increase economic pressure on Iran by targeting its trade partners with sanctions, lifting energy stocks. Petrobras rose 3% and PRIO gained 0.5%. Vale rose 0.8% despite lower iron ore prices. The company is assessing the possibility of recovering rare earths, gold and other minerals from mining tailings as part of a strategy to increase the recovery of already extracted materials. Vale also entered into a partnership with Adani Ports and NMDC to develop an integrated iron ore blending facility in India. Lower iron ore prices supported steelmakers, with Gerdau up 4.8% and CSN adding 1.9%. Caixa gained 0.5% after reporting a 5.9% increase in 2Q profit and an expansion in its credit portfolio.

The Ibovespa edged lower to trade below 174,500 on Thursday following July’s unemployment data and a rebound in oil prices. Brazil’s unemployment rate stood at 5.3% in the three months through July, in line with forecasts. The labor market remains highly resilient, with the employed population and the number of formally employed workers reaching record highs, which could lead the Copom to pause its 25-basis-point-per-meeting easing cycle. Meanwhile, oil prices rebounded after the US and Iran traded recriminations over Washington’s pledge to increase economic pressure on Iran by targeting its trade partners with sanctions, renewing concerns over energy costs. Financials were mostly lower, with Itaú, Bradesco and Itaúsa down about 0.5%. Caixa edged higher after reporting a 5.9% increase in 2Q profit and an expansion in its credit portfolio. Petrobras fell near 0.5% despite higher oil prices, which remain volatile and lower on a weekly basis.