FX.co ★ Ibovespa Tumbles on Major Financials

On Tuesday, the Ibovespa index fell sharply by 2.1%, closing at 134,432. This downturn was primarily influenced by escalating tensions between Brazil and the United States, following a Supreme Court decision concerning the implementation of foreign legislation. The ruling has increased the perceived risk associated with the country and prompted a significant reassessment of domestic interest rates. Investors are concerned that this decision limits potential negotiations regarding Washington's tariffs and increases the chances of retaliatory actions. The banking sector was notably affected, with significant declines seen in Banco do Brasil (-5.8%), Santander (-4.6%), Itaúsa (-5.0%), and Bradesco (-3.5%). These financial institutions are facing rising policy and funding costs, leading to greater provisioning requirements, shrinking net interest margins over time, and heightened legal and correspondent banking risks related to sanctions.