Ibovespa Edges Higher After Selic Cut

The Ibovespa edged 0.2% higher to close at 185,992 on Thursday after a volatile session following the BCB’s decision to cut the Selic rate by 25 bps to 13.75%. The Copom did not signal its next steps but left the door open for another cut at the next meeting. The message was one of continuity, with monetary policy remaining cautious, data-dependent, and focused on composure. Still, the index fell as much as 1.2% during the session amid concerns over government spending and electoral effects after the federal government announced a 15% increase in welfare benefits. Polls showing challenger Flávio Bolsonaro numerically ahead in second-round scenarios continued to support the index. A halt in the oil rally and the consequent softening of global yields also helped support the market. Major banks were mixed, with Banco do Brasil rising 0.3% and Santander advancing 2.5%, while Itaú inched lower and Bradesco fell 0.3%. Vale rose 2.1%, helped by higher iron ore prices.

The Ibovespa edged higher to trade near 186,000 on Thursday following the BCB’s decision to cut the Selic rate by 25 bps to 13.75%, in line with market expectations. The BCB left the next steps open, saying that the current environment of uncertainty calls for composure and caution in the conduct of monetary policy. It was the final monetary policy meeting before the presidential election in October. An AtlasIntel/Bloomberg poll showed Flávio Bolsonaro widening his lead over President Lula in a potential second-round runoff, although the candidates remained in a technical tie. Financials traded mostly higher, with Itaú, B3 and Caixa up around 0.5%. Utilities also gained, with Sabesp adding 1%. Vale rose nearly 1% as Chinese iron ore prices edged higher. Embraer gained more than 2% after announcing that BermudAir will become the first airline in the Americas to operate the E190F, an aircraft developed for cargo transportation. The aircraft will be operated under a leasing agreement.

The Ibovespa fell 0.5% to close at 185,548 on Wednesday following the US Fed’s monetary policy decision and ahead of the BCB’s. The Fed raised interest rates by 25 bps and a majority of FOMC members projected another hike this year. In contrast, the BCB is expected to announce a 25bps Selic cut after market close, marking the fifth consecutive reduction and the final Copom decision before the October presidential election. Financials were mixed, with private banks edging lower, while Banco do Brasil (+2.9%), BB Seguridade (+1.2%) and Caixa (+1.4%) posted gains. Petrobras weighed on the index, tumbling 3.4% as oil prices retreated amid reports that Saudi Arabia is offering additional crude cargoes via Oman. Miners also posted losses, with Vale down 2.4% and CSN Mineração down about 2.1%, while Usiminas fell 3.4%.