After a lull in the rise in domestic assets seen in recent weeks, the market could look to find fresh upward momentum. On a calm day abroad, when the US government “shutdown” ends, the dollar loses strength, and futures on New York’s major stock indexes approach stability, investors should monitor the external environment, but they can also pay attention to domestic issues that have brought about changes recently.
The main element that the agent monitors is the monthly Genial/Quaest survey. Markets had already priced in Lula’s government’s decline in popularity in recent days, based on private surveys pointing to this scenario. Research now shows that the gap between the PT and opposition candidates will narrow in the second round voting scenario for the 2026 presidential election, and the market may enter into a more positive “mood” as prices factor in a greater possibility of changes in economic policy management from 2027 onwards.
“This is positive for the market. Lula is still leading in all scenarios, but the previously wide margins are narrowing, and at a faster pace,” said a financial strategist at a major local bank.
In addition to political issues, market participants are likely to keep an eye on retail sales figures for September. If this statistic is lower than the authorities expected, it could further increase the chances that the market will cut interest rates early. Yesterday, central bank governor Gabriel Garipolo sought to draw strength from the market’s more “dovish” interpretation of the Kopom minutes. However, short-term interest rates remained stable at the close.
In fact, long-term interest rates continue to decline, raising some expectations among market participants that the Treasury will take advantage of recent price increases on the interest rate curve to increase the supply of fixed-rate securities, including by extending “duration” to compensate for investment flows. “If the Treasury ‘doesn’t intervene’, the equilibrium price will be much lower,” said one open market dealer.
Overseas, at around 8:10 a.m. (Brasilia time), S&P 500 futures were down 0.08%. The DXY Dollar Index fell 0.22% to 99.277 points. The 10-year T-note rate rose 1.2 basis points to 4.090%.
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