Brazil’s benchmark IPCA consumer price index rose just 0.16% in June, the national statistics agency reported on Friday, half the median forecast of 0.31% and the slowest monthly pace since October. The annual rate fell to 4.64%, below all estimates in a Bloomberg survey and still above the 4.5% upper tolerance limit, but the composition showed broad-based disinflation: food and beverage prices dropped 0.24%, industrial goods inflation halved to 0.11%, and a core inflation gauge tracked by the central bank decelerated from 0.45% to 0.21%. The data triggered an immediate repricing of Brazilian assets. The Ibovespa equity index surged 2.97% to its highest close since mid-May, with 77 of 78 stocks advancing, while the real strengthened 0.3% to R$5.11 per dollar, its firmest level in nearly a month.

Viewed from São Paulo, the mechanism was straightforward: the softer inflation reading reinforced expectations that the central bank’s Copom will deliver a 25-basis-point cut to the Selic rate at its 5 August meeting, taking it to 14.0%. Options pricing on the B3 exchange shifted dramatically, with the probability of a cut jumping from 27% three weeks ago to over 80% by Friday. Interest-rate futures fell sharply, with the January 2028 DI contract down 19 basis points to 13.85%. Analysts at Capital Economics noted that the downside surprise “will give policymakers the confidence to apply another cut,” though they cautioned that much depends on data due before the meeting. The rally was concentrated in domestically oriented sectors, as lower borrowing costs improve the present value of future corporate earnings and ease debt burdens for households and firms.

Elsewhere, emerging-market equities showed mixed resilience. India’s Sensex and Nifty 50 ended the week about 0.3% lower, but a 1% bounce on Friday—led by IT stocks after TCS earnings—trimmed losses. The India VIX volatility index fell 8% to 12.33, and a handful of mid- and small-cap stocks notched five consecutive sessions of gains. Indonesia’s Jakarta Composite Index rose 0.83% for the week to 5,924, with daily trading volumes up 17%, though average transaction value slipped 9%. The broader backdrop remained clouded by the US-Iran standoff: Brent crude traded around $76 a barrel, down on the day but up 5.4% for the week, as tanker traffic through the Strait of Hormuz slowed but did not halt. President Trump said the US had agreed to negotiate with Iran but that the ceasefire “is over,” keeping a risk premium in energy markets.

Looking ahead, the 5 August Copom decision is the next factual milestone. While the June IPCA print opens the door to easing, policymakers have warned that resilient activity, sticky services inflation—labour-intensive services accelerated to 0.55%—and pre-election fiscal stimulus could sustain price pressures. The El Niño weather pattern also threatens to lift food costs from August. In Mumbai, technical analysts flagged the Nifty’s prolonged indecision, with the index oscillating around its moving averages and needing a break above 24,550 or below 23,900 to establish direction. For now, the Brazilian inflation surprise has given local markets a clear, if potentially temporary, catalyst.