Ibovespa Rises as Election Polls Show Tighter Race

The Ibovespa rose about 1% to hover around the 178,000 mark on Monday following the release of new presidential election polls. The BTG/Nexus poll showed President Lula with 46% of voting intentions in a potential runoff versus 45% for Flávio Bolsonaro, viewed by markets as more fiscally restrictive amid elevated domestic yields and weak business activity, a technical tie. The AtlasIntel/Bloomberg poll showed Lula with 47.1% and Flávio Bolsonaro with 42.6% in a potential runoff, with Lula’s lead narrowing to 4.5 percentage points from 6.3 points in the previous poll released in July. Gains were broad-based, with Petrobras (+3%) outperforming as oil prices rebounded amid escalating Middle East tensions, with the US and Iran exchanging strikes for the first time in roughly a month. Major banks rose by up to more than 2%. Utilities also advanced, with Axia up over 1%. Vale gained about 1% as iron ore prices increased.

The Ibovespa added 0.3% to close at 175,665 on Friday, erasing earlier losses and extending its winning streak to eight consecutive sessions. Brazil created 58,568 formal jobs in July, well below forecasts of 112,000 and down sharply from 145,161 in June. Meanwhile, the PPI rose 1.94% year-on-year in July, slowing from 2.47% in June, while the IGP-M fell. Softer labor and inflation data could allow the BCB to continue its 25-basis-point easing cycle, supporting credit-sensitive stocks. Financials gained, with Bradesco and Itaúsa adding 0.9% and Banco do Brasil rising 1%. B3 gained 2% after JPMorgan said emerging-market equity funds recorded higher inflows, with Brazil recovering after four weeks of heavy outflows. Utilities also advanced, with Axia rising 0.9%. Petrobras climbed 2% after Bradesco BBI upgraded the stock to Outperform from Neutral. In contrast, Vale shed 0.7% after a trial concerning the taxation of profits earned by the miner’s foreign subsidiaries was suspended.

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.