Brazilian Stocks Rise on Election Outlook

The Ibovespa rose 0.5% to close at 205,083 on Friday in the final session before Brazil’s presidential runoff, recovering from earlier losses. A Datafolha poll showed President Lula and Flávio Bolsonaro tied at 50% each of valid votes. Earlier polls indicated a statistical tie. Some market participants view a potential Flávio Bolsonaro administration as more likely to rein in public spending, which they consider essential to lowering interest rates. However, neither the candidate nor his economic advisers have outlined concrete fiscal adjustments. The Ibovespa rallied to record highs after Flávio Bolsonaro finished ahead of Lula in the first round. Meanwhile, mid-month inflation came in below expectations, supporting equities. Banking stocks advanced, with BB gaining 3.3%. Bradesco added 0.7% following third-quarter earnings in line with market expectations and the announcement of a share buyback program. Petrobras rose 1.7% as oil prices rose. For the week, the Ibovespa fell 1.0%.

The Ibovespa fluctuated around the 204,000 mark on Friday in the final session before Brazil’s presidential runoff. A Datafolha poll showed Senator Flávio Bolsonaro and President Lula tied at 50% each of valid votes. Earlier polls also indicated a statistical tie, with Bolsonaro’s lead narrowing compared with previous surveys. Some market participants believe a Flávio Bolsonaro administration would be more likely to rein in public spending, although neither the candidate nor his economic advisers have outlined concrete fiscal adjustments. Financial stocks mostly traded lower, with Itaú edging down and Banco do Brasil and Itaúsa losing more than 0.5%. Bradesco fell nearly 2.5% despite reporting third-quarter earnings in line with market expectations and announcing a share buyback program. In contrast, Petrobras rose nearly 2% as oil prices climbed following fresh attacks in the Middle East. Vale gained nearly 1% as iron ore prices rebounded. On the week, the Ibovespa shed over 0.5%.

The Ibovespa fell 1.1% to close at 204,120 on Thursday amid uncertainty over the presidential race and corporate earnings. On Wednesday, a Quaest poll showed Flávio Bolsonaro’s lead over Lula narrowing to one percentage point, leaving the candidates statistically tied just four days before Sunday’s presidential runoff. Many market participants believe a Flávio administration would be more likely to rein in public spending, although neither the candidate nor his economic advisers have outlined concrete fiscal adjustments. Datafolha is scheduled to release a new presidential voting-intention poll after the market close on Thursday. Financial stocks declined, with Itaú down 1.8%, Itaúsa losing 2.6% and Bradesco shedding 2.1% ahead of its earnings release later in the day. Vale dropped 4% amid falling iron ore prices, with the miner set to report results next week. WEG slipped 2.7% after plunging 7% on Wednesday following disappointing results.