Brazil’s benchmark Ibovespa index closed at 174,070 points on Friday, July 3, marking a second straight session of gains as investors recalibrated their expectations for monetary policy.
The rally was accompanied by a strengthening of the domestic currency, with the real trading at 5.1686 per dollar.
The market move was driven by newly released factory data that came in weaker than anticipated.
The soft industrial output figures have intensified speculation that the Central Bank of Brazil will move to cut the Selic benchmark interest rate sooner than previously priced in.
Traders are increasingly viewing the economic slowdown as a catalyst for easing, which typically supports equity valuations and reduces the yield advantage of dollar-denominated assets.
This development follows a broader shift in sentiment for Brazilian assets.