Ibovespa Slips on Political Risks and Inflation Fears

The Ibovespa fell 0.9% to close at 185,629 on Wednesday amid renewed political risks in Brazil and escalating Middle East hostilities. Supreme Court Justice Flávio Dino ordered the reinstatement of Federal Police chief Andrei Rodrigues, granting an emergency request a day after Justice André Mendonça mandated his removal. Mendonça, who is overseeing a sprawling fraud investigation into failed lender Banco Master, had accused the Federal Police of illegally surveilling him and other public officials. The crisis reflects Brazil’s wider political polarization ahead of the October presidential election. Meanwhile, intensifying Middle East hostilities pushed oil prices higher, rekindling inflation fears. Major banks posted losses, with Itaú down 2% and Bradesco losing 2.4%. Utilities also closed lower, with Axia down 1.9%. WEG (-1.8%) and Ambev (-1.5%) also weighed on the index. Petrobras rose 0.7% on higher oil prices.

The Ibovespa fell nearly 0.5% to trade below 187,000 on Wednesday as intensifying hostilities in the Middle East pushed oil prices higher, rekindling inflation fears. Risks to global energy supplies have risen in recent weeks as the six-month-old conflict escalated. Credit-sensitive stocks, including major banks, came under pressure, with Itaú and Bradesco losing about 1%. Utilities also posted losses, with Axia falling more than 1.5%. Other notable laggards included Ambev (-1%) and WEG (-1.5%). Vale edged lower as iron ore prices fell. In contrast, Petrobras gained nearly 1.5% as the oil rally intensified.

The Ibovespa rose 1.2% to close at 187,367 points on Tuesday following Monday’s holiday, posting broad-based gains. Petrobras rose 2.1% as oil prices surged following attacks on energy infrastructure in Saudi Arabia amid renewed hostilities in the Middle East. Banks also performed well, Bradesco rose 1.8% and Itaú advanced 1.2%, as the Focus survey released Tuesday continued to project lower inflation, raising the prospect of further interest-rate cuts. Meanwhile, a BTG/Nexus poll pointed to a technical tie between Flávio Bolsonaro and President Lula in a potential presidential runoff, although Flávio moved into a numerical lead of one percentage point. On Monday, a Quaest poll also showed the two tied at 41% in a second-round scenario. Flávio Bolsonaro is viewed by markets as more fiscally restrictive amid elevated yields and weak business activity. Sabesp gained 1.1% after brokerages raised their price targets following a meeting with the company’s management.