U.S. tariff suspension boosts global sentiment, while Brazil grapples with political resistance to IOF hike and monitors employment data

Brazilian Real and Stock Market Decline as Global and Domestic Pressures Weigh

Brazil’s financial markets traded lower on Thursday, driven by a mix of global trade developments and domestic economic uncertainties. As of 1:05 p.m. local time, the U.S. dollar had fallen by 0.75%, trading at R$ 5.6524, while the Bovespa index dropped 0.57% to 138,102 points.

On Wednesday, the dollar had risen by 0.89%, closing at R$ 5.6951. The Bovespa also closed down 0.47%, at 138,888 points.

📉 Global Markets React to U.S. Tariff Suspension

Internationally, investor sentiment improved after a U.S. court ruled to immediately block the bulk of tariffs imposed by former President Donald Trump. The ruling, which affects reciprocal tariffs on over 180 countries enacted in early April, was seen as a positive step toward easing trade tensions. Analysts believe such moves reduce the likelihood of a global recession, encouraging risk appetite across markets.

📊 Political Uncertainty Surrounds Brazil’s IOF Tax Hike

In Brazil, investors remain focused on ongoing political resistance to the government’s proposal to raise the Tax on Financial Transactions (IOF). More than 20 legislative initiatives in Congress aim to overturn the measure. On Wednesday, Finance Minister Fernando Haddad warned that if the projected R$ 20 billion in revenue from the tax increase is lost, alternative budget cuts would be required.

While the Finance Ministry signaled it would explore new options to replace the tax hike, the market continues to price in uncertainty around fiscal sustainability.

📈 Employment Data Adds Complexity to Rate Outlook

Brazil’s labor market data also played a role in market movements. The latest Continuous PNAD survey showed an unemployment rate of 6.6% for the quarter ending in April — better than analysts expected. On Wednesday, Caged data revealed the creation of 257,500 formal jobs, exceeding forecasts.

Though positive, these numbers may complicate the central bank’s inflation control efforts. A strong labor market could delay anticipated interest rate cuts, a key concern for market participants.

📉 Corporate Highlights: Nvidia and Azul in the Spotlight

In the corporate sector, AI chipmaker Nvidia saw its shares rise after reporting stronger-than-expected quarterly revenue. Meanwhile, airline Azul made headlines after filing for Chapter 11 bankruptcy protection in the U.S. Its shares were subsequently removed from B3 stock indices, contributing to broader market volatility.