Brazil's benchmark Ibovespa index advanced 1.85% to close at 171,031.73 points on Friday, extending its weekly gain to 2.45%, as gains in Vale and major banks offset profit-taking in Petrobras.
The Brazilian real strengthened 1% against the U.S. dollar, ending the session at R$5.14, following recent declines that had pushed the currency to multi-month lows. The move reflected reduced pressure on the local unit amid shifting expectations around Brazil's electoral landscape and policy outlook.
Foreign investors continued to trim exposure to Brazilian assets, withdrawing R$1.6 billion from the B3 exchange on Wednesday, August 19, bringing August's net outflows to R$22 billion. Year-to-date inflows remained positive at R$14.4 billion, though the recent trend underscores caution ahead of the October presidential vote.
Political developments lent support to local markets, with polling showing a narrowing gap between President Luiz Inácio Lula da Silva and his challenger, Flávio Bolsonaro. Flávio's campaign bolstered its economic team with seven appointees from the former administration of Economy Minister Paulo Guedes, signaling a potential shift in policy priorities.
Finance Minister Dario Durigan said a potential Lula second term would prioritize phasing out the 6x1 work schedule and lowering interest rates while maintaining fiscal discipline. Lula is scheduled to meet congressional leaders on Wednesday to advance a key provisional measure on a tax on international purchases, a measure set to expire on September 8.
In commodities, Brent crude oil extended gains for a sixth straight session as threats of new U.S. sanctions on Iran supported prices. Talks between Tehran and Oman aimed at stabilizing shipping through the Strait of Hormuz offered limited relief to energy markets amid ongoing geopolitical risks.
