NOVAS REVELAÇÕES IMPLICAM MORAES E BANCO MASTER

Summary

Fernando Ulrich discusses Brazil's political and economic turmoil in early September. He highlights market optimism from tighter election polls and rising odds of Lula losing, seen in rising EWZ call buying, a stronger real, and a rallying local rate curve. He also covers Toffoli's suspension of Renan Santos's campaign, new leaked messages linking Alexandre de Moraes to Banco Master, and Q2 GDP showing weakening, government-supported growth. The main market implication is a political-change rally in Brazilian assets despite deteriorating fundamentals.

• Brazilian equities rally as election polls tighten and investors price higher odds of government alternation.
• EWZ call volume rises and the Brazilian real strengthens while the local rate curve rallies.
• Dias Toffoli suspends Renan Santos's campaign and social media, triggering opposition criticism and potential Streisand effect.
• New leaked messages suggest Alexandre de Moraes involvement in the Banco Master scandal; André Mendonça considers an investigation.
• Q2 GDP slows, household consumption falls, and growth depends heavily on government consumption.
• Ulrich views the macro backdrop as unsustainable and warns against interpreting the rally as fundamental strength.