Brazil’s Ibovespa falls more than 3% as politics intensify sell-off after series of highs

The Ibovespa fell more than 3% by 2 pm Monday, with Petrobras and Banco do Brasil among the biggest losers after Sunday’s events heightened tension in the presidential campaign and supported profit-taking after a series of highs.

At 2:30 pm, Ibovespa was down 3.09% at 116,025 points after rising in all trading sessions last week and posting a gain of 7%.

The financial volume in this session was over 12 billion reais.

The final week of campaigning for the second round of elections began in the shadow of former congressman Roberto Jefferson’s (PTB, right) gun and grenade attack on federal police officers, who issued a warrant for arrest.

Jefferson is a supporter of President and re-election candidate Jair Bolsonaro (PL, right), who already distanced himself from the former congressman on Sunday, calling him a “bandit” for shooting at the police officers.

However, as Levante Corp. noted, the incident received a negative echo throughout the political world and “hit like a bomb” in the current President’s campaign, which had to interrupt other damage control efforts.

However, the analysis firm’s team indicated that it is still uncertain whether the polls will change due to this episode, but hopes that the Luiz Inácio Lula da Silva (PT, left) campaign will take advantage of it.

Election polls suggest that narrowing the gap between Luiz Inácio Lula da Silva (PT, left) and Bolsonaro in the presidential race has given the Brazilian stock market an additional boost in recent trading days, especially from state-owned companies.

It is no secret that the financial market favors the Bolsonaro government’s economic profile, which envisions less state presence in the economy and favors privatization.

“The polls showed Bolsonaro improving, and now we don’t know for sure how that will play out,” said analyst Bruno Komura of Ouro Preto Investimentos, pointing out that state-owned companies fell sharply on that fear.

However, he stressed that all this does not change his assessment that the second round will be very controversial.

In this context, new surveys should attract even more attention. Ipec and AtlasIntel will publish the results of the recent election polls for the second round on Monday.

AtlasIntel President Andrei Roman shared on his Twitter account that the institute’s poll will include questions about Jefferson’s shooting incident with PF agents on Sunday.

For Komura, the weekend’s events weighed on the market, but part of Monday’s decline, albeit small, was also due to corrective moves after options expiration boosted the market on Friday.

The benchmark index of the Brazilian stock market, the Ibovespa, closed the last trading session up 2.35% at 119,928.79 points, gaining 7.01% for the week. At the peak of the session, it reached 120,751.55 points.

In addition to the political scenario, investors also reacted to a series of data from China, including a higher-than-expected GDP growth in the third quarter. In Europe, the figures increased the probability of recession.

On Wall Street, the S&P 500 rose 0.6%.