The Ibovespa sank 2.5% on Tuesday, closing at 167,875 — its lowest finish since January 20 and the steepest one-day drop since March 12. The sell-off followed JPMorgan’s decision to downgrade Brazilian equities to neutral within Latin America, citing weaker economic growth, deteriorating credit conditions, expectations of higher-for-longer interest rates, and rising volatility ahead of the presidential election. The bank also cut its year-end target for the Ibovespa.
In its minutes, Copom noted that inflation remains under pressure from robust demand and continues to warrant a restrictive monetary policy stance. July’s inflation print, which came in slightly above expectations, added to those concerns. Political risk also increased after a new poll showed President Lula widening his lead over Flávio Bolsonaro, intensifying investor focus on the potential fiscal stance of the next administration.
Financial stocks led the declines: Banco do Brasil dropped 3.7%, Bradesco fell 2.3%, and Itaú slid 3.5%. Petrobras lost 1.3% despite higher oil prices, while Vale retreated 2%.
