B3 Opens After Ibovespa’s 7.7% Jump to Record | Morning Call, Oct 6

On Tuesday, B3 opened following Ibovespa's 7.7% jump to a record high. The session is more about rates and cash flow rather than a continuation of the previous rally. The Selic rate remains at 13.75%, and the focus is on which domestic companies benefit most from cheaper money and a stronger real. Today's local data is limited until the trade balance report at 15:00 BRT (19:00 Lisbon).

The consensus points to a slightly smaller trade surplus than the previous month. Two blue chips, Ambev and Rede D'Or, pay interest on equity today, but their stock prices have already adjusted for the payout. Monday's PMI data shows Brazil's services index contracted to 49.2, marking its sharpest contraction in a year. This contraction adds a cautious note to the day's proceedings, as the rate-cut story now competes with softer activity.

The main focus of the day is whether softer rates and a stronger real will sustain the domestic value rotation. The market has shifted from election relief to a cleaner rates story. With the Selic at 13.75%, investors are wondering how much further domestic banks, retailers, and property names can go with falling financing costs.

The real's sharp improvement, with the commercial dollar closing at R$5.0022, changes the equation for importers and dollar-linked cost companies. The day's main corporate backdrop is the trade balance report, with traders positioning for it throughout the afternoon. The Copom story, with the Selic at 13.75%, is the central trade in Brazilian assets, making bank credit, homebuilders, and consumer discretionary names more attractive relative to export-heavy industries.