Brazil's Ibovespa falls for sixth straight session as dollar hits year's high

Brazil's benchmark Ibovespa fell 1.42% to 165,528.92 points on Tuesday, its sixth consecutive decline, as Petrobras and Vale dragged the index and investors fretted over the economic policy of the incoming Lula government. The dollar rose 0.79% to 5.487 reais, its highest close since 30 December last year, after touching 5.515 intraday. Turnover reached 32.4 billion reais.

The sell-off was triggered partly by rumours that Luiz Inácio Lula da Silva could meet economist André Lara Resende this week to discuss a proposal for a gradual reduction of the Selic rate, a form of interest-rate targeting. The PT leadership denied the possibility, but the episode added to uncertainty over how the next government will manage monetary and fiscal policy.

That uncertainty compounds the wait for Wednesday's Copom decision, with the vast majority of bets pointing to the Selic being held, according to Copom options. The Focus bulletin revised inflation and interest-rate projections higher across all horizons, with the Selic expected at the end of 2027 rising from 11.75% to 12.50% and 2027 IPCA inflation at 4.76%, above the target ceiling, one market participant noted. Future interest rates rose again, with the January 2028 DI contract climbing from 14.483% to 14.565% and the January 2035 contract from 15.333% to 15.410%.

Among banks, Bradesco fell 2.02%, Banco do Brasil 1.70%, BTG Pactual 1.05% and Itaú 0.47%, while Santander rose 2.26%. Cogna led the index's losses, down 12.66%, after Citi cut its recommendation on the shares from neutral to sell. CSN Mineração fell 5.14% and Azzas 5.09%. On the upside, Natura gained 4.32%, Embraer 4.24% and Usiminas 3%.

Oil closed lower for a second session, with January Brent down 1.12% at $103.60 a barrel and December WTI down 0.38% at $96.09, as investors weighed prospects for a diplomatic solution to the US-Iran conflict mediated by Qatar, though the risk of renewed fighting remains. In New York, the Dow Jones fell 0.38% while the S&P 500 rose 0.36% and the Nasdaq gained 0.83%, as markets watched the US midterm elections and technology shares recovered.