The Ibovespa index closed down by 1.09% on December 23, 2024, settling at 120,766.57 points after experiencing daily fluctuations between 122,104.68 and 120,617.32 points. Investors approached the session with caution as market sentiment was influenced by economic uncertainties surrounding Brazil's fiscal policies.
Today's trading saw significant movement within the Brazilian stock market, with daily financial turnover estimated at R$ 20.6 billion. The backdrop for this decline included reactions to new inflation projections from the Central Bank's Focus bulletin. While the session ended largely negative, certain stocks managed to stand out. Hypera (HYPE3) led the day’s gains with shares rising by 3.32% to R$ 18.65, following news of increased investment interest from Perenne Investimentos.
Suzano (SUZB3) also performed well, seeing gains of 2.72% to reach R$ 61.24, buoyed by announcements of price hikes for cellulose contracts starting January 1, 2025. Following closely was IRB (IRBR3), which climbed 2.42% to R$ 38.5, benefiting from positive quarterly earnings reports indicating profitability.
On the flip side, notable declines occurred among Automob (AMOB3), which plummeted by 19.05% to R$ 0.34, exacerbated by continued financial losses following significant declines last week. The airline company Azul (AZUL4) fell 9.34% to R$ 3.3, as investors feared rising costs associated with high interest rates and inflation, impacting operational expenses due to soaring leasing and fuel prices.
The triad of downturns continued with Brava Energia (BRAV3), which dipped by 7.67% to R$ 19.13, reflecting broader market trends as plunges in oil prices weighed heavily on energy sector stocks.
This decrease in the Ibovespa aligns with broader uncertainty around Brazil's fiscal stability, particularly following the passage of the government's fiscal adjustment package aimed at cutting expenses. Commenting on the situation, Roberto Simioni, chief economist at Blue3, remarked, "The economy projected by the government is expected to fall short of expectations after modifications to the original fiscal reform proposals."
According to the most recent Focus bulletin, inflation projections continue to trend upward, pointing to potential increases for the Índice Nacional de Preços ao Consumidor Amplo (IPCA). The median forecast for 2025 inflation rose to 4.84% after ten consecutive weeks of upward adjustments, exceeding the 4.50% ceiling of the government's target.
These heightened inflation rates have prompted expectations of higher interest rates, with forecasts now predicting the Selic rate to reach 14.75% by the end of next year, up from the previous estimate of 14%.
Market performance also reflected movements on international exchanges. The U.S. saw major indices, including the S&P 500, Dow Jones, and Nasdaq, rise marginally as investors reacted to recent developments involving the Federal Reserve and anticipated adjustments to its monetary policy.
"The projections of high interest rates for longer, with higher inflation and pricing of just two cuts in 2025, brought volatility to risk assets and more strength to the dollar," noted Paula Zogbi, head of research at Nomad, indicating how U.S. economic trajectories also influence local markets.
Looking forward, all eyes are on Gabriel Galípolo, who has taken over as head of the Central Bank following recent governmental transitions. President Lula expressed confidence, stating, "Gabriel Galípolo will be the head of the institution with more autonomy than it has ever had," highlighting the anticipated shift toward more independent monetary policy strategies.
The future of Brazil's economic outlook remains uncertain. Investors are digesting these new projections and market indicators, weighing potential regulatory and fiscal changes against risk appetites. This week’s trading activity may concentrate on the nuanced balance between achieving fiscal responsibility and encouraging growth, particularly as the holiday period typically brings about lower liquidity.
With multiple factors at play, ranging from domestic fiscal policies to international market dynamics, the Ibovespa's performance reflects the broader narrative of caution and speculation among investors as 2024 draws to a close.
