Brazilian Stocks Rise on Election Outlook

The Ibovespa rose 1.4% to close at 188,269 on Thursday, erasing earlier losses as the market priced in a higher probability of a change in power in October’s presidential election. Recent polls have shown Flávio Bolsonaro gaining ground in the presidential race, while the shift in odds on Polymarket added further momentum to the move on Thursday. Markets associate a potential Flávio Bolsonaro victory with expectations of greater fiscal austerity, while elevated domestic yields and weak business activity continue to weigh on the economic outlook. Gains were broad-based, with major banks posting sharp advances: Itaú rose 1.8%, Bradesco gained 3.9%, and Banco do Brasil added 2.8%. Utilities also closed higher, with Sabesp up 2.2%. Rede D’Or (+3.1%) also outperformed. Petrobras rose 1.4% on higher oil prices, while Vale shed 1.1% as iron ore prices fell.

The Ibovespa edged lower to trade below 186,000 on Thursday as persistent political uncertainty weighed on the country's economic outlook. A dispute between Supreme Court justices Alexandre de Moraes and André Mendonça has escalated into an institutional crisis. The dispute centers on failed lender Banco Master, which is under investigation in a bank fraud case, and Mendonça’s disclosure of private messages allegedly sent to Moraes. The public clash raised concerns over the court’s credibility, adding to political uncertainty ahead of October’s presidential election. Meanwhile, oil extended its rally following the biggest wave of attacks on shipping in the Strait of Hormuz by Washington and Tehran on Wednesday, global yields rose on fears of prolonged inflation. Financials posted losses, with Itaú down 0.5% and BB Seguridade losing nearly 2%. Vale shed 2%, while CSN Mineração fell more than 3.5% on lower iron ore prices. Petrobras gained 1.5% on the oil rally.

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.