BRAZIL: Ibovespa Ends Near Record Closing Level As Economic Optimism Rise

BRAZIL: Ibovespa Ends Near Record Closing Level As Economic Optimism Rise

Ibovespa, the benchmark stock market index in Brazil, jumped 1.75% on Wednesday, to 73,412.41 points, settling only 100 points below the record closing level of 73,516 points, reached on May 20, 2008.

Market players got excited after data showed that the 12-month inflation in August slowed more than expected, to 2.46%, the lowest level since 1999, increasing the chances of sharper cuts in interest rates by the central bank.

The market also believes that President Michel Temer has gained strength to approve measures in Congress and face a possible new complaint after the Brazilian Attorney General Rodrigo Janot has said that recent evidence could nullify a plea-bargain deal from JBS executives.

The deal with JBS allowed the attorney general to charge Michel Temer with corruption.

On Tuesday, the government was able to pass a bill in Congress that cuts financing subsidies to companies borrowing from a state bank. That and the green light from lawmakers to another legislation, which allows higher fiscal deficits in 2017 and 2018, “increase expectations regarding the Social Security reform” bill, said Guide Investimentos economist, Ignacio Crespo.

Among the highlights of the Ibovespa were Petrobras' shares (PETR3 +4.38%, PETR4 +4.23%), reflecting the appreciation of oil abroad. The biggest drop was Rumo's shares (RAIL3 -3.85%), which declined after the company said it intends to raise capital in a public offering.

Meanwhile, the locally traded U.S. dollar fell 0.57%, to R$ 3,1030, influenced by bets that Michel Temer is regaining his political strength.

On Thursday, the Brazilian markets will be closed for the Independence Day holiday, reopening on Friday, when analysts believe they should echo the Copom's decision on the interest rate.