Q2 Opens With a Bang: De-Escalation Hopes Spark the Biggest Rally Since May
Today’s Brazil morning call marks the first session of Q2 2026 — and the mood has shifted dramatically overnight. This is part of The Rio Times’ daily Brazil Financial Morning Call, covering Latin American financial markets.
Trump told reporters he expects U.S. forces to leave Iran “in two or three weeks,” declaring the military campaign has largely achieved its objectives. Reports that Iranian President Pezeshkian is open to ending hostilities under specific guarantees triggered a massive relief rally: the S&P 500 surged 2.91% to 6,528 — its best day since May — while the Nasdaq jumped 3.83% to 21,591. The Dow gained 1,125 points (+2.49%). Oil reversed hard: WTI fell to $101.38, Brent settled at $103.97 (−3.2%). The Ibovespa rallied ~2.7% to ~187,462 as banks and industrials led broad gains.
Wednesday brings the next wave: ADP private payrolls (08:15 ET), ISM Manufacturing PMI (10:00 ET, cons: 49.5), and Trump’s national address on Iran at 9:00 PM ET. EU CPI came in at 2.5% (below 2.6% cons) — hot but not shocking. Colombia hiked 100 bps to 11.25% in a dramatic session where the finance minister walked out. NFP Friday coincides with Good Friday — markets are closed, but the data drops. Q2 begins on war day 33 with the first real de-escalation signal in five weeks.
Three Things That Matter
| Tuesday | S&P 500 +2.91% to 6,528 (best day since May). Nasdaq +3.83% to 21,591. Dow +1,125 pts to 46,342. WTI −1.5% to $101.38. Brent −3.2% to $103.97. 10Y fell ~20 bps to ~4.13%. VIX crashed 17.5% to 25.25. Gold +3.08% to ~$4,698. CB Consumer Confidence 91.8 (beat 87.8 cons). JOLTS 6.882M (miss — hiring at 6-year low). Colombia hiked 100 bps to 11.25% — finance minister walked out. EU CPI flash 2.5% YoY (below 2.6% cons). Ibovespa +~2.7% to ~187,462. MERVAL +4.6%. Nike beat earnings. S&P 500 ended March −5.3% — worst month since 2022 |
| Overnight | Trump national address on Iran scheduled Wednesday 9 PM ET. Trump: U.S. will leave Iran in “two or three weeks” — no deal needed. Iran’s FM Araghchi: Tehran prepared for “at least six months” of war, not negotiating. Heavy strikes continue in Isfahan, Beirut. Pakistan-China call for immediate ceasefire. Asia rallied: Nikkei +3%, Kospi +5%. U.S. gas prices hit $4/gallon nationally. Sec. Rubio: “We are on or ahead of schedule.” Holiday-shortened week — Good Friday closure |
| Today | ADP Private Payrolls (08:15 ET, cons: 148K). ISM Manufacturing PMI (10:00 ET, cons: 49.5). Construction Spending (10:00 ET). Brazil Trade Balance (SECEX). Fed speaker: Schmid (12:00). Trump Iran National Address (21:00 ET) — the session’s defining event. Q2 FIRST SESSION. War Day 33. NFP Friday (markets closed Good Friday) |
Where We Left Off TUESDAY, MAR 31 — B3 CLOSE
The de-escalation trade erupted. The Ibovespa opened at 182,515 and rallied to approximately 187,508 intraday before settling near 187,462 (+~2.7%). Banks led the advance: Itaú and Bradesco both gained near 2%. The utilities sector posted gains with Axia and Sabesp advancing nearly 2%. Vale rose 1.9%, WEG gained 1.7%, and Ambev added 1.7%. Petrobras gained near 1% as oil prices fell from recent highs. Brazil’s industrial prices (PPI) fell 4.5% on an annual basis — a notable deflationary signal for producers.
Wall Street had its best session since May. The S&P 500 surged 2.91% to 6,528.52 with 441 of 500 components higher — a 4:1 breadth ratio. The Nasdaq jumped 3.83% to 21,591 as Nvidia rallied 5.6% on a $2 billion investment in Marvell Technology. Meta surged 6.6%, Microsoft rose 3.1%. The VIX plunged 17.5% to 25.25, the sharpest single-day drop in months. Despite Tuesday’s bounce, the S&P 500 ended March with a 5.3% decline — its worst month since 2022. Energy stocks were the sole sector lagging as oil reversed.
Consumer confidence surprised to the upside at 91.8 (vs. 87.8 consensus), but the details were mixed. The Present Situation Index surged 4.6 points to 123.3 — jobs remain “plentiful” for now. However, the Expectations Index dropped to 70.9, and inflation expectations spiked above 5%. JOLTS told the real labor story: openings fell 358,000 to 6.882 million, and hiring collapsed to 4.849 million — the lowest since March 2020 outside the pandemic. As covered in yesterday’s Morning Call, Powell’s dovish signal set the stage, and the de-escalation headlines delivered the follow-through.
The EU CPI flash printed at 2.5% YoY — below the 2.6% consensus but still a sharp jump from 1.9% in February. Energy costs surged 4.9% (from −3.1% in Feb), confirming the war’s inflation pass-through is underway but concentrated in energy. Core CPI actually cooled to 2.3% from 2.4%, giving ECB doves cover to argue for patience. Colombia’s central bank hiked 100 bps to 11.25% in a dramatic session — the finance minister walked out, President Petro called the decision “suicidal,” and the government withdrew from the board. As analyzed in the Colombia rate decision coverage, the LatAm tightening cycle is accelerating.
Market Snapshot DATA AS OF TUE, MAR 31 CLOSE
| Indicator | Close | Change |
|---|---|---|
| Ibovespa | ~187,462 | +~2.7% |
| USD/BRL | ~R$5.24 | ~flat |
| S&P 500 | 6,528 | +2.91% |
| Nasdaq | 21,591 | +3.83% |
| 10Y Treasury | ~4.13% | −20 bps |
| Gold (Spot) | ~$4,698 | +3.08% |
| Brent Crude | $103.97 | −3.2% |
| WTI Crude | $101.38 | −1.5% |
| VIX | 25.25 | −17.5% |
| DXY | ~99.5 | −0.8% |
What to Watch WEDNESDAY CATALYSTS
ADP private payrolls at 08:15 ET (cons: 148K) is the first look at March hiring — the precursor to Friday’s NFP. Given that JOLTS showed hiring at a six-year low, a weak ADP print would confirm the labor market’s deceleration and reinforce the rate-cut narrative. ISM Manufacturing PMI at 10:00 ET (cons: 49.5) tests whether the factory sector is holding above the 50 expansion line or slipping into contraction.
Trump’s national address on Iran at 9:00 PM ET is the session’s wildcard. The White House announcement came hours after his “two or three weeks” comments. The range of outcomes is wide: an announcement of accelerated withdrawal would extend Tuesday’s rally; a pivot to escalation (strikes on energy infrastructure, ground force deployment) would reverse it entirely. Secretary Rubio reinforced the “ahead of schedule” narrative on Fox News, but Iran’s FM Araghchi flatly denied any negotiations and said Tehran is prepared for six months of war.
Brazil’s trade balance data (SECEX) rounds out the domestic calendar. NFP is Friday — Good Friday — so markets are closed but the data publishes, meaning Monday’s open will price in both the jobs report and the full weekend of Iran developments. Fed’s Schmid speaks at 12:00 ET. Construction spending at 10:00 ET completes the data wall.
Ibovespa Setup TECHNICAL LEVELS
The Ibovespa surged ~2.7% to approximately 187,462 on Tuesday’s de-escalation rally. The index opened at 182,515 and rallied to ~187,508 intraday. RSI recovered to ~58.64 (MA: 48.42) — firmly above 50 and accelerating. The MACD histogram jumped to 418.81 (MACD: 391.09, signal: −27.72) — a strong bullish crossover with momentum widening. The breakout above 185,000 with volume confirms the bullish structure.
Resistance: 187,462 (Tuesday close) → 186,877 (upper SMA cluster) → 183,831 (prior swing high, now support) → 187,462 (new cycle high).
Support: 183,831 (prior swing) → 182,769 / 182,552 (SMA cluster) → 182,291 (20-day) → 181,551 / 181,274 (lower SMA range) → 178,099 (mid-range) → 176,224 (lower Bollinger) → 155,380 (200-day).
Copom Watch SELIC AT 14.75% · NEXT MEETING: APR 28-29
Tuesday’s developments are decisively bullish for the May cut case. Oil fell 3% on de-escalation hopes, the EU CPI came in below consensus, and Powell’s dovish signal remains fresh. If the Iran war winds down over the next two to three weeks as Trump suggests, the BCB has a clear path to a 25 bps cut in May. Brazil’s PPI falling 4.5% annually is a favorable signal, suggesting producer-level disinflation is intact.
However, Colombia’s aggressive 100 bps hike to 11.25% — with a deeply divided board and government walkout — serves as a cautionary tale. The BCB faces a different inflation picture (IPCA-15 at 3.74% vs. Colombia’s 5.29%), but the principle stands: energy shocks can rapidly unanchor expectations. The Focus Survey’s IPCA revision to 4.31% is approaching the 4.5% ceiling. If the de-escalation holds through the weekend, the April 28 meeting will be the most dovish setup since the war began.
Economic Calendar WEDNESDAY, APR 1
| Time | Event | Impact |
|---|---|---|
| 08:15 ET | ADP Private Payrolls (Mar, cons: 148K). First look at March hiring after JOLTS showed hiring at a 6-year low. NFP preview — weak print reinforces rate-cut narrative | HIGH |
| 10:00 ET | ISM Manufacturing PMI (cons: 49.5). Construction Spending. Factory sector expansion/contraction test — below 50 signals manufacturing recession | HIGH |
| All day | Brazil Trade Balance (SECEX). Fed’s Schmid (12:00 ET). Q2 opens. War Day 33. Asia rallied hard overnight (Nikkei +3%, Kospi +5%) | MEDIUM |
| 21:00 ET | Trump National Address on Iran. Binary event: withdrawal announcement extends rally; escalation reversal crashes it. NFP Friday (markets closed Good Friday, data publishes — Monday prices it in) | HIGH |
Latin America Markets TUESDAY CLOSE
| Index | Close | Change | RSI (14) | Signal |
|---|---|---|---|---|
| Ibovespa | ~187,462 | +~2.7% | ~58.64 | Bullish |
| IPC (Mexico) | ~68,611 | +~2.3% | ~54.95 | Bullish |
| COLCAP (Colombia) | ~2,286 | +~4.2% | ~54.86 | Neutral |
| IPSA (Chile) | ~10,640 | +~2.1% | ~53.28 | Neutral |
| MERVAL (Argentina) | ~2,997,780 | +~4.6% | ~65.20 | Bullish |
LatAm delivered a massive across-the-board rally on Tuesday. Argentina’s MERVAL surged ~4.6% to near 3 million with RSI at 65.20 — approaching overbought territory and the only LatAm index above 60. Colombia’s COLCAP rallied 4.2% despite the central bank drama — the de-escalation wave overwhelmed the domestic policy shock. Mexico’s IPC gained ~2.3% and Chile’s IPSA rose ~2.1%. The entire region rode the relief trade. As covered in the latest LATAM Pulse, Brazil enters Q2 as the clear EM outperformer.
Commodities & FX KEY MOVES
Oil reversed sharply as the de-escalation trade took hold. WTI fell to $101.38 (−1.5%) and Brent dropped 3.2% to $103.97 — the biggest one-day decline since the war began. Trump’s “leaving very soon” comments and reports of Iran’s willingness to negotiate punctured the supply-disruption premium. However, Brent still ended March with its largest monthly gain in years. The Strait of Hormuz remains functionally closed, and shipping insurance premiums remain elevated — even a ceasefire won’t normalize flows quickly.
Gold surged 3.08% to ~$4,698 — counterintuitively rallying alongside equities. The move was driven by the ~20 bps drop in 10Y yields (to ~4.13%) and dollar weakness (DXY −0.8%). Gold’s RSI recovered to ~46.85 (MA: ~37.99), building recovery momentum from deeply oversold levels. Silver held near $75 with RSI at ~46.92. The precious metals complex is finding a floor after a volatile March.
USD/BRL held near R$5.24, remarkably stable for a session with 3% equity swings and 3% oil moves. The real continues trading on domestic fundamentals: 14.75% carry, disinflation, and institutional flows. Bitcoin recovered to ~$68,776 (+0.8%), holding above the $68,000 support that has defined its March range.
Yields were Tuesday’s standout move. The 10Y dropped ~20 bps to ~4.13% — a massive rally reflecting both the de-escalation bid and the weak JOLTS data. The combination of potential war-end and deteriorating labor market has reignited rate-cut expectations. The 2Y fell below 3.80%. The VIX collapsed 17.5% to 25.25 — back below 30 for the first time in over a week — signaling the fear premium is unwinding rapidly.
Risk Map BULL vs BEAR
| Bull Case | Bear Case |
|---|---|
| Trump’s “two to three weeks” timeline is the first concrete exit signal — If the U.S. withdraws, oil drops toward $80–90 and the entire inflation/rate calculus resets. The S&P 500’s 2.91% rally was the second-strongest Q1 close since 1953. The VIX collapse to 25.25 suggests the fear premium is unwinding rapidly. Asia confirmed overnight: Nikkei +3%, Kospi +5%.
EU CPI below consensus at 2.5% means the ECB has cover to wait — Core inflation fell to 2.3%, services eased. The energy pass-through is real but concentrated. If the war ends, the ECB may never need to hike. This preserves the global easing bias that benefits EM assets, builders, banks, and the Ibovespa’s rate-sensitive sectors. Brazil enters Q2 with maximum structural advantage — Ibovespa ~187,462 vs. S&P 500 still down 5.3% for March. The 14.75% carry, IPCA-15 disinflation, PPI at −4.5% annual, and the May cut path create a floor that survived five weeks of war. Colombia’s chaos makes Brazil’s institutional stability look even more attractive. |
Iran says it’s not negotiating and is prepared for six months of war — FM Araghchi’s flat denial of talks contradicts every Trump claim. The Strait remains closed. Heavy strikes continued in Isfahan and Beirut even as Trump spoke. Declaring victory and leaving doesn’t reopen Hormuz or normalize shipping insurance.
JOLTS hiring at a 6-year low signals the labor market is cracking — 4.849M hires is pandemic-era territory. Inflation expectations above 5% in the CB survey. If stagflation takes hold — weak jobs + sticky inflation — no central bank has good options, including the BCB. The “schizophrenia” between Present Situation (123.3) and Expectations (70.9) is the widest gap in years. Wednesday’s Trump address could pivot to escalation, not withdrawal — “We want to knock out every single thing they have” doesn’t sound like de-escalation. If the address announces energy infrastructure strikes or ground operations, Tuesday’s rally reverses entirely. The market is pricing in the best case on a single data point — the worst case hasn’t been eliminated. |
Positioning BOTTOM LINE
Q2 opens with the most bullish setup since the war began. Tuesday’s 3% rally across US equities, the $3 drop in Brent, and the 20 bps Treasury move all point to the same conclusion: the market is pricing in a war-end scenario for the first time. Trump’s “two or three weeks” timeline, if credible, transforms every macro variable — oil back toward $80, inflation pressure receding, rate cuts back on the table globally.
But the gap between Trump’s rhetoric and Iran’s reality remains wide. Araghchi says Tehran isn’t negotiating. Strikes continued in Isfahan even as Trump spoke. The Strait of Hormuz remains closed. The shipping industry warns that even a ceasefire won’t normalize flows for weeks. Wednesday’s Trump address at 9 PM ET is the binary event — it either confirms the exit ramp or reveals that “two or three weeks” was aspirational.
Brazil’s positioning is favorable regardless of scenario. If the war ends, the Ibovespa rallies further on oil-driven disinflation and an accelerated BCB cut path. If the war continues, the 14.75% carry and domestic fundamentals provide a floor that has been repeatedly tested and held. Colombia’s 100 bps hike and government walkout make Brazil’s institutional stability look even more attractive by comparison.
The week is holiday-shortened (Good Friday). NFP publishes Friday into a closed market — Monday’s open will be chaotic. ADP Wednesday and Trump’s address are the actionable catalysts. The JOLTS data confirms what Powell already flagged: the labor market is in a fragile equilibrium with downside risk. If March NFP confirms that deterioration, rate cuts become a when-not-if for both the Fed and the BCB. Open Q2 long Brazil, constructive US on de-escalation, hedged against Wednesday night’s address.
RT Staff Reporters · This newsletter is for informational purposes only and does not constitute investment advice. Always consult a licensed financial advisor before making investment decisions. Past performance does not guarantee future results.