Brazilian Stocks Rise on Election Outlook

The Ibovespa jumped 2.6% to close at 192,114 in a highly volatile session ahead of Sunday’s first round of elections. The index posted strong gains early in the session amid a favorable external backdrop, then erased them on political risks before regaining momentum. The proximity of the election keeps demand for hedging elevated. When markets reopen on Monday, the election result, the composition of Congress and signals on fiscal policy are likely to carry greater weight in the pricing of Brazilian assets. Meanwhile, oil prices fell after the G7 agreed to release strategic reserves to ease mounting fuel costs, reducing concerns over energy-driven inflation. Softer-than-expected US payrolls also supported credit-sensitive stocks as expectations of a Fed rate hike this month declined. Financials gained, with Bradesco up 3.2%. Utilities advanced, Axia rose 2.8%. Petrobras added 2.8%, while WEG gained 3.8% and Rede D’Or rose 3.6%. The Ibovespa added 4.7% on the week.

The Ibovespa rose more than 0.5% to hover around 188,500 on Friday, posting broad-based gains amid a favorable external backdrop. Oil prices fell as European governments considered releasing strategic reserves to ease mounting fuel costs, reducing concerns over energy-driven inflation. Softer-than-expected US payrolls also supported credit-sensitive stocks, reducing expectations of a Fed rate hike this month. Major banks rose, with Itaú and Bradesco gaining about 1.5%, while Banco do Brasil rose more than 2%. Utilities also advanced, with Axia up more than 2%. Friday marks the last trading session before the first round of Brazil’s presidential election on Sunday. A poll released Thursday showed President Lula and  Senator Flávio at a technical tie in a potential second-round matchup.  Also on Thursday, Bolsonaro withdrew from a debate hours before it was scheduled to begin. The broadcaster subsequently canceled the event, which would already have gone ahead without Lula.

The Ibovespa gained 0.5% to close at 187,197 on Thursday, supported by energy and mining stocks. Petrobras rose 1.3% as the oil rally accelerated after reports that the US is sending a third aircraft carrier strike group to the Middle East. Vale gained 0.6% during a session without iron ore trading in China due to the Golden Week holiday. Major banks ended mixed amid elevated global bond yields and energy-driven inflation concerns. Banco do Brasil fell 0.2%, while Bradesco rose 0.3%. Itaú and Santander declined 0.3% and 3%, respectively. Retail stocks performed well, with Magazine Luiza extending gains from the previous session to rise 1.5%. Azzas jumped 7% amid new proposals for Farm. Meanwhile, Datafolha is due to release a new election poll after the bell. Globo will also host a debate among presidential candidates at night, marking the end of the campaign. Senator Flávio Bolsonaro confirmed his attendance, while President Lula is unlikely to attend.