Ibovespa Slips as Fiscal Uncertainty Weighs, Technicals Signal Caution

Brazil’s B3 closed Friday under pressure, as official data show the Ibovespa fell 0.18% to 136,865.79 points.

The decline followed persistent fiscal uncertainty after the government’s move to challenge Congress on the IOF tax decree.

This legal standoff kept investors cautious, despite record highs in U.S. markets and favorable labor data at home.

The session saw the real strengthen, with the dollar slipping 0.12% to R$5.48.

Trading volumes remained robust, but market breadth favored gainers only slightly, with 507 stocks rising against 402 declining and 75 unchanged.

Volatility dropped, as the CBOE Brazil ETF Volatility Index fell to a six-month low. Fundamentals remain mixed. Brazil’s economy continues to grow, but at a slower pace.

BBVA Research forecasts GDP growth at 2.2% for 2025, down from 3.4% in 2024, as tighter fiscal and monetary policy begins to bite.

Inflation is easing but remains above target, with projections of 5.0% by year-end. The Selic rate stands at 14.75%, and the central bank signals no imminent rate cuts, citing the need to anchor inflation expectations.

The day’s biggest winners included Engie Brasil Energia, up 4.24% after positive sector news and a favorable outlook from Citi.

Companhia Brasileira de Distribuição rose 2.01%, while Vale gained 1.92% as iron ore prices advanced.

On the other hand, Grupo Vamos fell 6.56% amid concerns over possible tax changes for new vehicles, Brava Energia lost 3.59% tracking lower oil prices, and Cosan dropped 2.46%.

Ibovespa Slips as Fiscal Uncertainty Weighs, Technicals Signal Caution

Internationally, Wall Street’s S&P 500 and Nasdaq both closed at new highs, buoyed by optimism over U.S.-China trade talks.

European stocks also advanced, with the Stoxx 600 up 1.14%, while Asian markets showed mixed results.

The global backdrop provided little support to B3, as local fiscal issues dominated sentiment.

Technical analysis of the daily Ibovespa chart reveals a market in consolidation. The index trades just above its 50- and 100-day moving averages, with the 200-day average offering solid support near 133,000.

Bollinger Bands have tightened, indicating reduced volatility and a likely buildup to a directional move.

The MACD shows a bearish crossover, with the histogram in negative territory, confirming waning momentum. The RSI stands at 52, suggesting neutral conditions but with a downward tilt.

The 4-hour chart reinforces this cautious stance. The index remains below key short-term moving averages, and the MACD and RSI both point to mild short-term weakness.

Support near 136,500 remains critical; a break below could accelerate losses, while resistance at 137,500 caps any rebound attempts.

ETF flows reflect growing international interest in Brazilian equities, with substantial inflows reported in recent weeks as investors seek value and anticipate eventual rate cuts.

However, persistent fiscal risks and the lack of clear reform progress continue to limit upside.

In summary, the Ibovespa’s modest decline on Friday underscores the market’s sensitivity to fiscal developments and technical resistance.

Investors watch for resolution on the IOF front and clearer signals from policymakers before committing to a new trend.

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