Ibovespa Falls on Inflation Concerns

The Ibovespa shed about 0.5% to trade below 185,500 on Friday following the release of IGP-M inflation data for September. Brazil’s General Price Index – Market rose 1.47% in the second preview for September, rebounding from the 0.36% deflation recorded in the same August reading. Meanwhile, oil prices moved higher, recovering from a pullback as supply concerns persisted. Elevated energy costs continue to put upward pressure on inflation and, consequently, borrowing costs. Major banks moved lower, with Banco do Brasil losing 2% and Bradesco down more than 0.5%. Utilities also posted losses, with Axia shedding nearly 1%. Miners traded lower despite higher Chinese iron ore prices, with CSN Mineração down 1.5% and Usiminas losing 1%. Cemig fell nearly 1% after JPMorgan maintained its sell recommendation on the stock. Petrobras lost nearly 0.5% despite higher oil prices.

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.