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Financial News: BRAZIL: Ibovespa Falls 2.9% Amid Uncertainties As Interest

BRAZIL: Ibovespa Falls 2.9% Amid Uncertainties As Interest Rates Rise

06/07/2018 - 18:36:00 (RTTNews)

(RTTNews) - After a panic moment in the Brazilian markets, the Ibovespa slowed the sharp drop and fell 2.97% to 73,851.43 points Thursday, while investors speculate on a possible action by the country's Central Bank with the locally traded U.S. dollar on the rise - which may also impact inflation.

Uncertainties over the election prospects in Brazil also weigh heavily on the index. Opinion polls show two candidates - Jair Bolsonaro and Ciro Gomes - poorly-seen by market players.

"That was a moment of panic, it gave an impression that it would have a circuit-breaker because of the speed of the fall. The Central Bank interventions in the foreign exchange market, the foreigner is speculating on the Brazilian currency, maybe the central bank even has to raise interest at the next meeting. It was a very abrupt scenario for Brazil," said Terra Investimentos' analyst Regis Chinchila.

At its worst moment, the Ibovespa dropped by almost 7%. For DNAinvest partner Leonardo Ramos, there really is a change of scenario for Brazil, catalyzed by the government's lack of strength during the truck drivers' strike.

"The future is uncertain for the country, there is a good chance that a populist candidate wins the elections, and not only on the left, like Ciro Gomes, but on the right, equally populist, like Bolsonaro."

The locally traded U.S. dollar, which broke R$ 3.95, closed up 2.24%, quoted at R$ 3.925. The one-day interbank deposit futures rates (DI rates) is expected to be 7.585% in January 2019. For Ramos, the Central Bank can act on interest rates at the next meeting, and there is a chance that the higher dollar will have a direct impact on inflation.

According to Chinchila, the news that M?rcio Fran?a, from PSB, would have signaled support to Ciro Gomes opened space for the strong sales movement. Ramos believes in a stampede of foreigners, who ended up buying the greenback.

Ramos does not rule out the possibility of a "point and technique" rise for Friday but notes that the trend of the index remains bearish, due to the electoral uncertainty and the little strength that Geraldo Alckmin, the preferred candidate of the market, has shown in the surveys.

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