The Brazilian stock market, represented by the Ibovespa index, has gained momentum, reflecting optimism about the possible passage of a fiscal package in Congress. This optimism coincides with ongoing negotiations between the government and legislators.
On December 10, Ibovespa rose by 0.80%, closing at 128228.49 points. At the same time, the dollar traded at R$ 6.0480, marking a decrease of 0.57%.
Investor sentiment has been weighed down by reports suggesting the federal government plans to release $6.4 billion in amendments to lawmakers. This financial move could facilitate progress on key legislative issues, including the fiscal package.
In addition, market participants are closely monitoring the health status of President Luiz Inácio Lula da Silva and its implications in legislative processes.
Alexandre Padilha, the Minister of Institutional Relations, assured that the hospitalization of the president would not hinder the Congress. He emphasized that the fiscal package will pass this year as well.
Inflation data also played an important role in shaping market reactions. The National Consumer Price Index (IPCA), Brazil’s official measure of inflation, rose 0.39% in November. This shows a slowdown compared to October’s growth of 0.56%.
This figure slightly exceeded market expectations of 0.36%. Over the past year, inflation has accumulated to 4.87%, from 4.76% a month ago, exceeding the upper limit of the inflation target.
Copom meeting and market reactions
The day marked the first session of the Monetary Policy Committee (Copom) meeting, where analysts forecast a 75 basis point increase in the key interest rate, taking it to 12.00% per annum.
The final decision will be announced on December 11 after market hours. Economists polled by the Central Bank have revised their forecasts for the Selic rate from 11.75% to 12% for this year, predicting an increase from the current rate of 11.25%.
The weekly report points to a possible increase of 0.75 percentage points at the next Copom meeting. In stock performance, Gol Linhas Aéreas saw its shares rise nearly 17% after filing for Chapter 11 bankruptcy protection in New York.
This move marks a step towards restructuring its operations. A court hearing regarding this plan is scheduled for January 15. Gol also hinted at a possible merger with Azul Linhas Aéreas or a joint venture between the two companies as part of his restructuring strategy.
Economic Indicators
Cyclical stocks on the Ibovespa recovered from earlier losses as interest rate concerns eased ahead of Copom’s decision. Vamos shares rose more than 10%, leading gains among Brazilian stocks.
Conversely, shares of meatpacking companies and exporters faced downward pressure due to a strengthening of the Brazilian real against the dollar. Companies such as BRF, JBS and Suzano suffered significant declines as their earnings are closely linked to dollar transactions.
Companies that depend heavily on international markets tend to suffer when the dollar weakens against the real. This is because their income is affected by currency fluctuations.
Among the major players on the Ibovespa, Petrobras closed higher amid rising oil prices, while Vale fell slightly after earlier gaining ground despite strong iron ore prices. Internationally, US stock indexes ended lower for a second day in a row as investors awaited further data on inflation.
The consumer price index (CPI) for November is expected to show a modest increase in price pressures when it is released on 11 December. Economists forecast a monthly increase of 0.3% and an annual increase of 2.7%, compared with previous figures of 0.2% and 2.6%.
The CPI is not the Federal Reserve’s primary measure of inflation. However, it will affect expectations ahead of the Federal Open Market Committee (FOMC) meeting scheduled for December 17-18.
