Brazil opened Friday with a clean set of domestic signals and little noise from abroad. The data split is stark: August industrial production rose 0.8% month on month (after –0.1% in July) but fell 0.7% year on year, while September business surveys turned down as Services PMI slid to 46.3 and the Composite to 46.0—both in contraction territory.

What it means for markets today

• Equities: The mix favors exporters and basic-materials names that benefit from a firmer factory pulse, while domestically sensitive groups (retail, travel, small-cap services) face headwinds from shrinking activity. Defensive cash-generators (utilities, staples) may see relative support if risk appetite fades.

• Rates: The PMI slump argues for easier financial conditions ahead, but the bounce in output complicates the picture. Expect the DI curve to weigh the depth and timing of any additional Selic easing against the risk that activity stabilizes before inflation is comfortably lower.

Brazil’s Factories Stir as Services Contract: What Today’s Data Means for Markets. (Photo Internet reproduction)

• Currency: With services contracting and growth momentum mixed, BRL direction will hinge on how traders read the policy path and Brazil’s terms-of-trade backdrop. A softer domestic demand profile typically caps aggressive BRL gains, but the solid industrial print tempers recession fears and should limit downside.

• Credit & Earnings: Weaker services point to slower ticket growth and higher delinquency risks at the margin for consumer-exposed lenders, while the industrial uptick is a modest positive for logistics, steel/cement, and capital-goods orders into Q4. Retailers and discretionary names may guide cautiously.

The story behind the numbers

Brazil’s economy is pivoting from services-led resilience toward an uncertain hand-off to industry. Factories are stabilizing but not yet accelerating on a year-over-year basis; services are cooling below 50, signaling a near-term drag on domestic demand.

That combination keeps policy optionality open for the central bank while reminding investors that earnings breadth may narrow into year-end.

What to watch next

Company trading updates from consumer and transport names for confirmation of the services slowdown; guidance from industrials on order books and inventories; and the next inflation prints and central-bank communications for clues on the pace and extent of Selic moves.