Brazil's benchmark Ibovespa advanced 0.34% to 175,169.84 points by midday on Wednesday, extending a five-day winning streak as investors weighed softer-than-expected inflation data against concerns over medium-term price expectations.
Trading volume totaled R$11.4 billion, while foreign investors added a net R$69 million to local equities on Tuesday, leaving the monthly outflow at R$21.37 billion. The index's modest gain followed a 0.06% rise in the July IPCA-15 reading, with the August measure falling 0.4%, bringing the 12-month increase to 4.24% from 4.52% previously. The outcome undershot Reuters' consensus forecast of a 0.3% monthly decline and a 4.34% year-over-year increase.
The U.S. Personal Consumption Expenditures Index held steady at 3.7% year-over-year in July, matching June's pace and exceeding economists' expectations of 3.6%, adding to global inflation pressures.
Among blue-chip lenders, Bradesco PN gained 1.49%, while Itaú Unibanco PN rose 0.71% and Santander Brasil advanced 0.94%. Banco do Brasil ON edged up 0.31% as investors monitored ongoing negotiations tied to the government's rural sector debt restructuring program. Energy stocks were mixed: Petrobras PN climbed 1.06% and ON added 0.61%, but Vibra Energia ON fell 2.29% after the government extended a gasoline subsidy of R$0.44 per liter until September 9.
Healthcare firm Hapvida ON surged 3.74% after announcing plans to repurchase up to R$250 million in debentures and settle a hedge operation early, alongside a R$322.6 million reduction in gross debt through discounted transactions. Conversely, mining major Vale ON slipped 0.43% despite a 0.49% gain in Dalian iron ore futures, while smaller energy names Brava Energia ON, Prio ON and PetroReconcavo ON declined between 1% and 1.59%.
Analysts at XP maintained their base-case scenario for the Selic rate at 14.00% by year-end, though with a dovish tilt. "Our baseline still assumes a 14.00% Selic at year-end, but with a downward bias," said economist Basiliki Litvac. "Recent inflation readings support additional cuts, while softer activity data over the past months reinforce the case. However, medium-term inflation expectations remain on an upward trajectory, which could limit the scope for further reductions."
