Ibovespa Reverses Early Gains
The Ibovespa edged below 176,000 on Tuesday, erasing earlier gains after plunging 13.7% on Monday following President Lula’s re-election. The index had initially risen in a corrective move after a wave of selling in Brazilian assets in the previous session. Lula’s victory erased the risk-premium reduction that followed the right-wing landslide in the first round. The selloff largely reflects market disappointment over expectations of a faster fiscal adjustment under the next administration. Investors had widely viewed a potential Bolsonaro government as more likely to rein in public spending, seen as essential to lowering interest rates. Financial stocks reversed early gains, with Itaú and Bradesco each falling 1%, extending losses of around 16% on Monday. Petrobras dropped another 1% as oil prices declined, following an 8.2% plunge in the previous session. Vale fell more than 1.5% ahead of its earnings report due Thursday, after outperforming the index on Monday.
The Ibovespa edged below 176,000 on Tuesday, erasing earlier gains after plunging 13.7% on Monday following President Lula’s re-election. The index had initially risen in a corrective move after a wave of selling in Brazilian assets in the previous session. Lula’s victory erased the risk-premium reduction that followed the right-wing landslide in the first round. The selloff largely reflects market disappointment over expectations of a faster fiscal adjustment under the next administration.
Investors had widely viewed a potential Bolsonaro government as more likely to rein in public spending, seen as essential to lowering interest rates. Financial stocks reversed early gains, with Itaú and Bradesco each falling 1%, extending losses of around 16% on Monday. Petrobras dropped another 1% as oil prices declined, following an 8.2% plunge in the previous session. Vale fell more than 1.5% ahead of its earnings report due Thursday, after outperforming the index on Monday.