Ibovespa Retreats After Election-Driven Rally

The Ibovespa fell 0.5% to close at 205,835 on Tuesday after hitting a record 206,912 in the previous session, when Flávio Bolsonaro finished ahead in Sunday’s first election round, defying most polls. The index was weighed by Petrobras (-2.8%) and Vale (-1.4%). Petrobras fell as the oil rally lost steam before prices edged higher late in the session. Vale extended losses ahead of the reopening of China’s iron ore market, which was closed from October 1 to October 7 for the weeklong National Day holiday. Banco do Brasil (-6.4%) and B3 (-2.7%) pulled back after surging 11% and 22.6%, respectively, on Monday. Other laggards included Axia (-3.1%), WEG (-1%) and Ambev (-1.5%). In contrast, Itaú (+2%) and Bradesco (+4.4%) extended gains after rallying 10.4% and 13.6%, respectively, on Monday. Brazil’s trade surplus surged 146.4% year over year in September, above forecasts of $7.19 billion and marking the sharpest annual increase since January 2024.

The Ibovespa rose around 0.5% to near the 208,000 mark on Tuesday after closing at a record 206,912 the previous session, as Flávio Bolsonaro finished ahead of President Lula in the first election round, defying most polls. The result triggered a sharp repricing of Brazilian assets, with Bolsonaro receiving 47.03% of valid votes versus 45.16% for Lula. Markets view the senator as more fiscally restrictive amid elevated domestic yields and weak business activity. Morgan Stanley upgraded Brazilian stocks to Overweight from Neutral. Financials extended gains after surging as much as 22% the previous session, with Itaú up 2% and Bradesco gaining more than 3.5%. Other notable gainers included Rede D’Or (+2%) and Sabesp (+1.5%). Supporting equities, Brazil’s 10-year bond yield fell below 13%, while global yields also eased from multi-year highs as oil prices pulled back.

The Ibovespa surged 7.7% to a record 206,912 on Monday, its biggest one-day gain in over six years, after Flávio Bolsonaro finished ahead of President Lula in the first election round, defying most polls. The result triggered a sharp repricing of Brazilian assets. Bolsonaro received 47.03% of valid votes, compared with 45.16% for President Lula. The senator is viewed by markets as more fiscally restrictive, amid elevated domestic yields and weak business activity. Bolsonaro outperformed the average of polls tracked by Goldman Sachs by more than four percentage points. Gains were broad-based, with financials leading the index. Itaú soared 10.4%, Bradesco jumped 13.6%, BB rose 11% and B3 surged 22.6%. Other outperformers included Sabesp (11.6%) and Petrobras (8.2%). JPMorgan upgraded Brazil to Buy. Banks expect the index to extend its record-setting streak in upcoming sessions. The Ibovespa also set a record for trading volume, with more than 5 million trades during the session.