Magazine Luiza rises 5.56% as interest rates drop

Shares of Brazilian retailer Magazine Luiza rose 5.56% to close at 10.25 Brazilian reais on Thursday, October 8. The stock traded up roughly 10% earlier in the session, closing off its highs as retail shares continued to advance.

The advance tracked a broad decline in Brazilian interest rate futures across the entire curve. In late afternoon trading, the interbank deposit rate for January 2028 dropped 5 basis points to 12.54%, compared to the previous settlement of 12.593%. On the long end, the January 2035 rate fell 18 basis points to 12.60% from 12.779%. Since Sunday following the first-round election results, the January 2035 rate has accumulated a 153-basis-point drop amid market expectations around the race between Flavio and Lula.

Analysts view the company as a prime beneficiary of declining borrowing costs. Goldman Sachs and BTG Pactual estimate that each 1-percentage-point cut in interest rates boosts earnings by roughly 20%, though Goldman Sachs maintains a neutral rating on the stock. Itaú BBA sees upside potential of more than 40% in its normalised scenario.