Ibovespa Rises on Prospects of Fiscal Adjusment

The Ibovespa rose near 1% to hover above 172,500 on Wednesday after the government’s economic team presented a preliminary fiscal adjustment proposal to Congress. Although details remain scarce, it is the first concrete sign of public-account adjustment since President Lula’s reelection. Credit-sensitive stocks gained. Major banks advanced, Itaú rose over 1%, Bradesco added more than 1.5%, and Banco do Brasil gained over 0.5% ahead of its earnings. Other financials also advanced, with B3 up over 2.5% and Itaúsa nearly 1.5%. Utilities rose as well, with Axia adding more than 1%. Meanwhile, Petrobras fell nearly 3% after its Q3 report. Net income of R$39.75 billion, up 21.5% year on year but below market expectations of R$47.02 billion. In contrast, Vivo added 4% as it began Q4 positively, with higher sales amid the launch of new Apple smartphone models. Rede D’Or gained 3% ahead of its release tomorrow.

The Ibovespa fell 0.5% to close at 171,337 on Tuesday, erasing earlier gains as market focus shifted to the Copom minutes and prospects of a US rate hike. Copom’s latest minutes showed that moderation in activity may intensify, but deteriorating inflation expectations and rising consumer costs require monetary policy to remain restrictive. Meanwhile, hotter-than-expected October US inflation reinforced expectations of further Federal Reserve hikes. Credit-sensitive stocks posted losses, with major banks and utilities down. Itaú shed 1.2%, Bradesco 0.9%, and Axia 1.1%. Vale pared recent gains, falling 2% amid lower iron ore prices. On the earnings front, Embraer soared 9.3% after reporting revenue above estimates and setting a Q3 record. Itaúsa edged 0.2% lower despite a 25% annual increase in net profit. Petrobras fell 0.5% ahead of its earnings report due after market close, as oil prices extended losses.

The Ibovespa rose around 0.5% to hover near 173,000 as investors assessed corporate earnings and the minutes of the BCB’s latest meeting. Embraer (+5%) reported Q3 revenue of R$12.1 billion, beating estimates and setting a third-quarter record, although adjusted profit fell 15.6% year-on-year. Itaúsa (+1%) posted a 25% annual increase in net profit. Brava Energia (-2.5%) beat EBITDA estimates but it still posted a quarterly decline, Bradesco BBI maintained its buy rating. Magazine Luiza surged 10% after reporting results in line with expectations. Petrobras (-1%) is due to report later today amid falling oil prices. Banco do Brasil (+1%) reports tomorrow, followed by B3 (+1.5%) and Rede D’Or (+0.5%) on Thursday. Meanwhile, Copom’s latest minutes showed that moderation in activity may intensify, but deteriorating inflation expectations and rising consumer costs require monetary policy to remain restrictive.