Ibovespa Falls as Political Risks Persist

The Ibovespa fell 0.6% to close at 187,207 on Friday as the Supreme Court crisis continued to fuel political uncertainty, weighing on the country’s economic outlook. Chief Justice Edson Fachin ordered Justice André Mendonça to remove, within 24 hours, the secrecy surrounding proceedings related to investigations into Banco Master. This includes possible irregularities involving the financing of the film “Dark Horse,” which could affect Flávio Bolsonaro’s electoral prospects. Markets view Bolsonaro as more fiscally restrictive, while elevated domestic yields and weak business activity continue to weigh on the economic outlook. State-controlled financial stocks traded lower, with Banco do Brasil down 1.4%, BB Seguridade shedding 4.1%, and Caixa losing 2.4%. Utilities also posted losses, with Axia down 1.6%. CSN plunged 7.4% as investors booked profits, with the stock still up 4.2% on the week following a CEO change. The Ibovespa rose 1.1% on a weekly basis.

The Ibovespa fell more than 0.5% to trade below 187,500 on Friday, weighed down by losses in the energy sector amid a pullback in oil prices. Prospects for diplomatic efforts to ease tensions around the Strait of Hormuz dragged crude prices lower. Gulf foreign ministers are expected to meet their Iranian counterpart in Oman on Monday as part of efforts to secure support for a temporary arrangement to manage shipping through the strait. Petrobras lost more than 1.5%, while Prio shed over 2.5%. Broader sectors traded mostly below the flatline as the Supreme Court crisis continued to fuel political uncertainty, weighing on the country’s economic outlook. Estate financial stocks traded lower, with BB Seguridade shedding more than 2% and Caixa falling 1%. Utilities posted losses, with Axia down 0.5%. Meanwhile, annual inflation came in slightly below estimates, helping limit losses among major private-sector banks on increased expectations for another Selic cut at the next Copom meeting.

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.