Tags: Brazil | Markets | Sink | Real | Circuit | Breaker | Crisis

Brazil Markets Sink, Triggering Circuit Breaker on Fresh Crisis

Image: Brazil Markets Sink, Triggering Circuit Breaker on Fresh Crisis
(Dollar Photo Club)

Thursday, 18 May 2017 11:05 AM

Brazil’s real, stocks and bonds sank as a fresh political crisis ensnared President Michel Temer and threatened to derail a reform agenda that had helped restore confidence in the embattled South American nation.

The Ibovespa slid 10 percent before trading was halted, and futures on the real dropped 6 percent -- also triggering a circuit breaker. Oil producer Petroleo Brasileiro SA and lender Banco do Brasil SA plunged at least 18 percent. Bond risk as measured by five-year credit default swaps soared more than 60 basis points, the highest since January.

“Markets will overreact, but the reality is that Brazil is rooting out the corruption that has plagued it for centuries,” said James Gulbrandsen, a Rio de Janeiro-based portfolio manager at NCH Capital who holds Brazilian shares. “Our view is that this significantly increases the likelihood of new elections within the coming months.”

The declines drove up the yield on the country’s 1 billion euros ($1.1 billion) of bonds due 2021 by the most since they began trading three years ago. The iShares MSCI Brazil Capped exchange-traded fund plunged 16 percent. The extra yield investors demand to hold the nation’s debt instead of U.S. Treasuries jumped the most since September 2015.

One of the country’s largest newspapers reported on Wednesday evening that a secret recording exists of Temer approving a payment to Eduardo Cunha, the mastermind behind last year’s impeachment of former president Dilma Rousseff. The tape was submitted to the Supreme Court by two senior executives from meat-packing giant JBS SA as part of a plea bargain deal, according to O Globo newspaper. The paper provided neither a transcript nor a recording.

The presidential press office vehemently denied the allegations.

Brazilian assets have rallied for the past year as Temer pursued policies designed to pull the country out of recession and close a budget deficit.

The scandal adds to a turbulent 24 hours in global markets, with volatility returning on reports U.S. President Donald Trump had asked then-FBI Director James Comey to drop an investigation into former national security adviser Michael Flynn in February, before firing him last week.

© Copyright 2017 Bloomberg News. All rights reserved.

 
1Like our page
2Share
Markets
Brazil's real, stocks and bonds sank as a fresh political crisis ensnared President Michel Temer and threatened to derail a reform agenda that had helped restore confidence in the embattled South American nation.
Brazil, Markets, Sink, Real, Circuit, Breaker, Crisis
350
2017-05-18
Thursday, 18 May 2017 11:05 AM
Newsmax Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved