Ibovespa Surges Nearly 2% as Risk Appetite Returns to Brazil

The Brazilian stock market saw a significant rebound on Thursday after a day of risk aversion following the Federal Reserve's monetary policy decision. The Ibovespa rose nearly 2% to close at 177,159 points, its high for the session.

This recovery was driven by investors taking advantage of lighter positioning and thinner liquidity on Brazil's stock exchange to add to their equity exposure. However, losses in some banking stocks, including Santander Brasil, which fell 1.48% after already dropping 7.37% in the previous session, limited the Ibovespa's gain.

Michel Frankfurt, head of Scotiabank's brokerage operation in Brazil, expressed concerns about a potential credit squeeze in the country due to recent developments at major banks such as Bradesco and Santander. He noted that high interest rates and elevated debt levels are causing problems for companies, and that corporate executives will need to respond to these challenges during this earnings season.

The move was also driven by a rebound in artificial intelligence (AI)-related sectors, which fueled greater demand for risk assets and benefited the Brazilian currency. Additionally, the U.S. dollar's slide against the Japanese yen, following a possible intervention by the Japanese government in the currency market, played a significant role in the Ibovespa's gain.