Ibovespa Rallies on Positive Inflation Signals

On Friday, the Ibovespa, Brazil’s main stock index, soared, marking a significant upturn in its trajectory.

It closed with a robust 1.51% increase, reaching 126,526.27 points—its largest single-day gain since a 1.63% rise on April 8.

This uplift brought the weekly total to a 1.12% increase, snapping a three-week losing streak.

The rally was significantly driven by key inflation data from both Brazil and the U.S., which also buoyed major indices in New York.

The U.S. Personal Consumption Expenditures (PCE) index, a critical gauge for the Federal Reserve, reported a year-on-year increase of 2.7% for March, up from 2.5% in February.

While annualized figures slightly exceeded expectations, quarterly data released with the U.S. GDP figures underperformed, preparing markets for potential downturns.

Helena Veronese, chief economist at B. Side Investments, noted that these indicators rekindled expectations that the Fed might start reducing interest rates as early as September.

Despite initial fears, a day earlier, unexpectedly high PCE data for Q1 had led market participants to postpone predictions for the Fed’s easing to November or December.

Following these mixed signals, the commercial dollar fell sharply by 0.89% to R$5.11.

In Brazil, preliminary IPCA data for April showed inflation slowing, coming in below forecasts, which bolstered the Ibovespa’s strong finish.

This trend prompted a drop in future interest rates (DI rates), although they stayed above 10%.

Veronese highlighted the possibility of a 0.50% cut in the Selic rate due to cooling inflation but cautioned that fiscal and external factors needed close monitoring.

Only ten Ibovespa stocks fell on the day. With a public holiday midweek, the upcoming shorter trading week might not offer the same calm.

This suggests that investors should relish this exceptional market performance while it lasts.