Ibovespa Rises as IBC-Br Rebounds and Oil Rally Eases

The Ibovespa rose nearly 1% to trade near 206,000 on Friday following fresh economic activity data and a slowdown in the oil rally. The BCB’s Economic Activity Index rose 0.3% in August from July, in line with market expectations and rebounding from a 0.2% decline. Meanwhile, easing oil prices offered some relief to credit-sensitive stocks that had been under pressure from energy-driven inflation concerns. Gains were broad-based. Major banks advanced, although more modestly than the index, with Itaú up 0.5%. Utilities also gained, with Axia rising 1%. Petrobras added 1%. Other notable gainers included Rede D’Or (+1%) and retail stocks. On the political front, a Datafolha poll confirmed the trend in recent surveys, showing a narrowing gap between Flávio Bolsonaro and President Lula. Meanwhile, a PoderData/AYA poll showed the two candidates tied.

The Ibovespa fell 1.1% to close at 204,324 on Thursday as investors reassessed the political outlook ahead of Brazil’s presidential runoff later this month. New polls showed Flávio Bolsonaro’s lead over President Lula narrowing, tempering optimism that had fueled a rally in Brazilian assets last week after the senator unexpectedly finished ahead of Lula in the first round. Although Flávio Bolsonaro has yet to present detailed policy plans, investors view him as more likely to pursue fiscal reforms, including spending cuts, which are seen as essential to lowering interest rates. However, questions remain about the fiscal discipline of a potential Flávio administration. Political pressure has already prompted the candidate to change his position and support ending the six-days-on, one-day-off work schedule, which the Senate approved yesterday. Among the notable laggards, Itaú fell 1.3%, Banco do Brasil gained 1.8%, Axia and Petrobras each lost 1.3%, and WEG dropped 2.7%.

The Ibovespa fell over 1% to around 204,000 on Thursday following weaker-than-expected retail sales data. Brazilian retail sales volume rose 0.1% month-over-month in August, missing forecasts for a 0.7% increase and adding to signs of a gradual slowdown in economic activity. Services and industry point in the same direction, with services volume falling 0.1% and industrial production declining 0.6%. The weakness is most pronounced in sectors sensitive to credit and financial conditions, including furniture, household appliances, vehicles and construction materials. Among major retailers, Magazine Luiza led losses, falling 5%, while other retail stocks declined between 1% and 3.5%. Other credit-sensitive stocks also weakened, with Itaú and Bradesco down about 2%, alongside other major financial shares. Utilities fell as well, with Axia losing nearly 1%. Petrobras and Vale each shed about 1% as oil prices fluctuated and iron ore prices extended their declines.