Brazil's Ibovespa Falls for Sixth Straight Session Amid Fiscal Concerns

Brazil's Ibovespa stock index fell for the sixth consecutive session on Tuesday, closing down 1.42% at 165,529 points. The index hit its lowest closing level since January 19.

Market concerns centered on the formation of the next government's economic team and potential appointments to the central bank board. Investors also reacted negatively to a proposal by economist André Lara Resende to artificially reduce the Selic interest rate.

“Looking at what happened in Turkey, I would not be surprised if”

Petrobras shares weighed heavily on the index, with preferred shares falling 3.79% and common shares dropping 3.65%. Vale's preferred shares lost 2.85%, while Bradesco's ordinary shares led bank declines with a 2.02% drop.

Rumors that Lara Resende would present his proposal to President Luiz Inácio Lula da Silva this week were denied by Finance Minister Dario Durigan. Government members also denied reports that Lula might meet with Lara Resende.

Analyst Fernando Siqueira of Eleven Financial Research compared the proposal to Turkey's forced interest rate cuts starting in 2021, which were followed by higher inflation and sharp currency depreciation before being reversed.

The Central Bank's Focus survey showed analysts now expect the Selic rate to reach 13.50% by year-end, up from 13.25% previously, and 12.50% by the end of 2027, up from 11.75%.

October saw the benchmark index fall 9.88%, its largest monthly decline since June 2022, following a weekly drop of more than 18% in late October, the worst weekly performance since 2020.