Ibovespa Rises Slightly Amid Promises of Spending Cuts

Friday’s trading saw the Ibovespa index struggle to stay positive, closing with a minor gain of 0.08% and ending at 119,662.38 points.

This increase of 94.85 points was insufficient to offset the week’s 0.91% decline, marking the fourth consecutive week of losses.

The commercial dollar rose 0.28% to R$5.38 ($1.01), while future interest rates fell across the curve.

Under pressure to cut expenses rather than increase revenue to meet fiscal targets, Planning and Budget Minister Simone Tebet promised “a menu of possibilities” to reduce expenses.

She emphasized that these cuts would not compromise social investments. Tebet emphasized the need for daily meetings to finalize these plans by the end of June.

She clarified that, while everything is considered, the minimum wage increase and retirement benefits are protected.

This new approach, supported by Finance Minister Fernando Haddad, aims to restore rationality in government interactions with market agents, businesspeople, and investors.

This is crucial to calm financial markets, which have seen declines due to fiscal concerns over the past month.

Tebet addressed rumors of Haddad’s weakening influence, affirming his strong personal relationship with President Lula.

She emphasized that the economic agenda has been the government’s most successful aspect in 2023. While the government’s rhetoric is proactive, practical results are awaited.

Market analysts predict a primary deficit of R$79.715 billion ($14.90 billion) for 2024, worsening from the previous estimate of R$76.825 billion ($14.36 billion).

This reflects skepticism about the government’s ability to eliminate the deficit with the new fiscal framework approved last year.

The 2024 Annual Budget Law forecasted a small surplus of R$2.8 billion ($0.52 billion), but recent reports revised this to a deficit of R$14.5 billion ($2.71 billion), equivalent to 0.1% of GDP.

In contrast, major US indices closed mixed, with the S&P 500 and Nasdaq setting new records. The Ibovespa, however, has hit yearly lows, falling over 10% in 2024.

XP Investimentos notes that Ibovespa’s performance strongly correlates with long-term US interest rates.

Stock Market Update

Despite government efforts, the stock market remains unconvinced. Vale (VALE3) ended down 0.36%, with iron ore posting losses for the week.

Petrobras (PETR4) fell 2.20% following management changes and a slight decline in international oil prices. PRIO (PRIO3) rose 0.36%, benefiting from the dollar’s recent increase.

WEG (WEGE3) gained 0.91%, while B3 (B3SA3) recovered with a 2.88% rise after approving R$470 million ($87.85 million) in dividends.

The Economic Activity Index (IBC-Br) stabilized, edging up by 0.01% in April after a 0.34% decline in March. This fell short of analysts’ expectations of a 0.45% increase.

After a challenging week, investors deserve a peaceful weekend. Next week includes Copom’s Selic rate decision, crucial for market direction. Enjoy the calm while it lasts.

Related coverage: Despite Political Easing, Ibovespa Ends in the Red · Brazil's Tax Reform: States and Cities Eye Wealthier Wallets for Revenue Boost · WEG and Horse Forge Path to Eco-Friendly Transport · The Power Few: Decoding Global Pandemic Policies

More: Brazil news in English, every day from The Rio Times.

This article was produced by The Rio Times’ automated newsroom system. How we use AI · Report an error · Editorial responsibility: Matthias Camenzind, Editor-in-Chief

LatAm Markets: Live Signals → — real-time movers, turnover leaders and FX across Latin America.