Brazil Ibovespa Rises Over 1% in Election Week as Banks Lead and the Real Firms
The Brazil Ibovespa was up about 1.5% on Wednesday afternoon, 30 September, as banks and Petrobras led and the real firmed, four days before the vote. The post Brazil Ibovespa Rises Over 1% in Election Week as Banks Lead and the Real Firms appeared first on The Rio Times .
On Wednesday, 30 September, the Brazil Ibovespa index rose by 1.37% to close at 186,340 points, marking a four-day climb before the first round of the presidential election. Banks and Petrobras were the leading stocks, while the dollar decreased to R$5.174 per dollar. The index surged 2,512 points from Tuesday's close of 183,828, and briefly topped 187,000 points before retracting some of the gains by the end of the day.
Banks were at the forefront for the second consecutive day, with Itaú preferred shares increasing by 3.90% and Bradesco preferred shares up 2.76%. Banco do Brasil experienced a 2.31% gain, and BTG Pactual shares rose by 1.25%. Petrobras also contributed to the rally with its preferred shares up 0.47% in the morning. The biggest gainer of the day was retailer Magazine Luiza, which increased by 12.52%.
However, not all stocks performed well; homebuilder Tenda fell by 5.23% after J.P. Morgan expressed more caution regarding the third quarter, citing tighter lending by state bank Caixa. Wednesday's rise followed a four-day decline; the index closed at 187,423 points on 22 September and dropped to 182,991 by 28 September. It rebounded by 0.46% on Tuesday, as Brazil Ibovespa ended a four-day slide at 183,828 points before the election.
The primary driver was news from Washington, where the PCE price index, the US Federal Reserve's preferred inflation gauge, rose by 3.4% in the year to August, falling short of the 3.7% expectation. This development increased the likelihood that the Fed would maintain rates unchanged during its meeting at the end of October. Initial gains on Wall Street eventually faded, and the major New York indexes ultimately closed mixed.
The real followed the dollar's decline, closing at R$5.174 per dollar, down 0.8% from the session's start. The central bank's PTAX reference rate ended at R$5.1809. On Tuesday, the currency was at R$5.217, and on Monday, it was R$5.225 per dollar. Some traders linked part of the rally to polls suggesting a slight advantage for Senator Flávio Bolsonaro over President Lula.
However, poll results remain tight and diverge in various directions. A Quaest survey published on Monday indicated that Lula had 39% support, while Bolsonaro had 34% in the first round, with a tie at 42% in a runoff. Additionally, regional polls, such as Rio Grande do Sul Poll Puts Flávio Bolsonaro Three Points Ahead of Lula, added to the uncertainty.
HSBC estimates a potential 35% upside for Brazilian shares if the election outcome strengthens expectations of fiscal consolidation, while the bank anticipates a 12% fall if no such prospect materializes. The fiscal backdrop remains contentious, with August's consolidated public sector primary deficit standing at R$10 billion (approximately US$1.9 billion), and gross public debt reaching 82.9% of GDP from 82.6% on InfoMoney's report.
High borrowing costs also weigh on companies as Brazil Corporate Debt Costs Near 24% as Moody's Warns of a 2027 Squeeze reported. The Brazil Ibovespa remains about 0.6% below its level on 22 September, with Thursday and Friday being the last two trading days before the election. The impact of Sunday's outcome on prices remains unclear.
HSBC anticipates that the initial reaction will dwindle until the next government's cabinet and fiscal plans become clearer.
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