Ibovespa Gains Ahead of Election Runoff Poll

The Ibovespa rose 0.9% to close at 206,220 on Thursday ahead of the first Datafolha poll for the presidential runoff, due shortly after the close. A PoderData/Aya poll showed Senator Flávio Bolsonaro with 53% of valid votes, against 47% for incumbent Lula. In Sunday’s first-round election, Bolsonaro finished ahead of Lula, contrary to most polls, pushing the index to an all-time high on Monday, led by financial stocks. Markets view the senator as more fiscally restrictive amid elevated domestic yields and weak business activity. His economic team is considering spending cuts equivalent to around 2% of GDP. Financials traded mixed, with B3 gaining 2% and Bradesco falling 1.3%. Petrobras followed the sharp rise in international oil prices, gaining 2.1%. Retail stocks also supported the index, with Magazine Luiza jumping 5.6%. Meanwhile, Vale extended its losing streak to four sessions, falling 1.6% as iron ore prices hit an 18-month low in China.

The Ibovespa edged higher toward 205,000 on Thursday, supported by gains in the energy sector. Petrobras rose nearly 2% as oil prices surged on reports that the US is planning new strikes against Iran, risking the recent rebound in Middle Eastern oil exports. Meanwhile, the financial sector was mixed amid an unfavorable external backdrop and ahead of the first presidential runoff poll following the first round. Global yields also extended their rally as surging oil prices intensified inflationary pressures, while expectations of a hawkish Fed added to pressure on credit-sensitive stocks. Datafolha is due to release the first poll for the presidential runoff following Sunday’s first-round election, in which Flávio Bolsonaro finished ahead of Lula, contrary to most polls. The result pushed the index to an all-time high on Monday, led by financial stocks. On Thursday, Itaú and Bradesco fell about 1% each, while B3 gained 1% and Caixa and BB Seguridade rose nearly 0.5%.

The Ibovespa fell 0.7% to close at 204,302 on Wednesday but remained 9.6% higher on the week as markets gauged the outlook for earnings and interest rates should presidential candidate Flávio Bolsonaro win this month’s runoff. Bolsonaro finished ahead of incumbent President Lula in the first round, pushing the index to a record high. Banks and financial services companies led those gains as the resulting rally in bonds and credit improved the sector’s outlook. On Wednesday, the financial sector pulled back amid elevated global bond yields and hawkish FOMC minutes. Itaú fell 2.7%, Bradesco lost 3.7% and Itaúsa shed 3.3%. Vale fell 2.3% ahead of the reopening of Chinese iron ore markets on Thursday following the National Day holiday. CSN Mineração (-1.2%) and steelmakers also posted losses. Other laggards included Ambev (-1.7%) and Embraer (-5.1%).