Brazilian Stocks Fall Ahead of Copom Decision

The Ibovespa fell 1.5% to close at 165,362, reaching a one-year low following Monday’s holiday, as Petrobras and credit-sensitive stocks posted losses. Petrobras dropped 4% as oil prices plunged during the holiday amid signs of progress in US-Iran diplomacy. Investors monitored the upcoming Copom decision after the first Focus Bulletin since the election showed higher forecasts for inflation, interest rates and the dollar. In contrast, growth expectations were revised down. The S&P Global Brazil Manufacturing PMI for October also remained in contraction territory. Most market participants expect the benchmark Selic rate to remain unchanged at 13.75% per year, amid concerns over the country’s fiscal outlook. Major banks posted losses, with Itaú down 0.6% and Bradesco shedding 2.2%. Utilities declined as well, with Axia falling 2.3%.

The Ibovespa fell nearly 2% to trade below 165,000 on Tuesday, nearing a one-year low following Monday’s holiday, as Petrobras shares led losses. Petrobras sank nearly 7% as oil prices extended yesterday's plunge after US President Donald Trump announced that Washington would end its financial support for Israel by year-end, while Iranian officials signaled openness to diplomacy. Prio also fell 5.5%. Meanwhile, major banks were subdued ahead of the BCB’s upcoming monetary policy decision, amid concerns over the country’s fiscal outlook. Itaú and Bradesco edged lower, while Banco do Brasil lost nearly 1%. Utilities also posted losses, with Axia and Sabesp each falling about 2%. Other laggards included WEG (-1%), Ambev (-0.5%) and Rede D’Or (-1.5%).

The Ibovespa fell 0.7% to close at 167,922 on Friday, extending its losing streak to five sessions and posting its worst weekly performance since March 2020, at the height of the pandemic. The index had rallied in early October amid bets on a change in government and fiscal adjustment. However, Lula’s reelection triggered the unwinding of those positions, while concerns over public spending and debt prolonged the selling pressure. The shift particularly affected companies sensitive to credit conditions and consumer spending. Banks declined, with Bradesco and Itaú each losing 2.1%. Steelmakers posted sharp losses, with CSN plunging 8.5%. In contrast, Vale, whose shares had plunged more than 11% over the month, rose 3.3% despite reporting a net loss in the third quarter, as its copper business helped offset costs in iron ore and nickel. Petrobras also advanced 1%, tracking oil prices. The Ibovespa sank 17.3% on the week and 10% for the month.