Brazilian Stocks Close Lower Amid Election Uncertainty

The Ibovespa gained 0.7% to close at 172,458 on Friday following the Senate’s approval of the federal government’s fiscal adjustment bill. The Senate approved the main text of a complementary bill the previous day. The bill provides for fiscal measures with an estimated impact of up to R$60 billion in 2027 to ensure surplus targets. However, senators are only expected to analyze amendments that could still modify its content next Tuesday. JPMorgan believes the government’s proposed 2027 fiscal measures are insufficient given the size of the public accounts challenge and may pressure companies, recommending caution with Brazilian equities. Financials were mixed, Itaú and Bradesco adding 1.4% each, while Banco do Brasil fell 2.4%, extending an 8.6% slump from the previous session following weaker-than-expected results. B3 gained 0.9% after reporting revenues above estimates. Elsewhere, Rede D’Or rose 2.5% after posting EBITDA in line with estimates. The index rose 1.8% on the week.

The Ibovespa fell 0.4% to close at 171,324 on Thursday following the release of October’s inflation data and amid a new batch of corporate earnings. Annual inflation rose to 4.63% in October from 4.58% in September, below market expectations of 4.74% but marking a four-month high and remaining above the BCB’s 4.5% target ceiling. With inflation still above target, the BCB is expected to remain cautious about resuming the Selic easing cycle. Credit-sensitive stocks fell. Financials declined, with Banco do Brasil plunging nearly 8.6% after Q3 results missed estimates and the bank cut its projections and dividends. B3 shed 0.5% ahead of its earnings. Utilities declined, with Axia down 2.8%. Elsewhere, Rede D’Or shed 0.8% ahead of its results. Vale fell over 1% on lower iron ore prices. Petrobras jumped 2.8% as the oil rally resumed. Meantime, bond yields rose as the government’s fiscal adjustment proposal disappointed markets.

The Ibovespa rose 0.4% to close at 172,060 on Wednesday after markets received moderately positively the first signals about the fiscal package President Lula is preparing for 2027. Planning Minister Moretti said the bill’s fiscal measures will have an impact of R$50 billion to R$60 billion in 2027, increasing in subsequent years, and will give the government more instruments to improve primary results. Moretti also said the proposal would allow additional spending freezes if necessary and that the government will “certainly” post a primary surplus in 2027. Major banks were mixed, Itaú rose 1.3%, while Banco do Brasil fell 1.2% ahead of its earnings. Other financials advanced, with B3 up 2.2% and Itaúsa 1.5%. Utilities also rose, with Axia adding 0.6%. Petrobras fell 3.1% after its Q3 report, as net income came in below market expectations. Vivo jumped 5.4% as it began Q4 with higher sales. Rede D’Or gained 2.7% ahead of its release tomorrow.