Brazilian Stocks Decline Amid Speculation of Austerity Measures Being Undone

Strategic Insights -

Brazilian stocks slid on Monday, October 12, on speculation that President Dilma Rousseff may reverse austerity measures aimed at winning investor confidence. The Ibovespa, Brazil's benchmark stock index, was flat at 48,591.23 at the close of trading in Sao Paulo, with 39 of its 68 stocks declining. The slide was led by iron-ore miner Vale SA, which dropped 2.8 percent to 16.99 reais, its longest losing streak this year. Usinas Siderurgicas de Minas Gerais SA, a steel company, fell to an 11-year low after Moody's Investors Service cut its credit rating.

Key Takeaways:

  • Investors have become cautious after speculation that President Dilma Rousseff may undo austerity measures enacted to win investor confidence.
  • Thirty-nine of the 68 stocks in the Ibovespa declined, with Vale SA and Usinas Siderurgicas de Minas Gerais SA leading the slide.
  • Usinas Siderurgicas de Minas Gerais SA slumped to an 11-year low after Moody's Investors Service cut its credit rating.
  • Petrobras, Brazil's state-run oil company, gained 2.6 percent to 10.17 reais on the release of its third-quarter results, which were delayed due to the company's efforts to account for losses from corruption.
  • Analyst Paulo Henrique Amantea stated that investors are taking a wait-and-see approach, as "it's better to wait and see what is really implemented."
  • The Ibovespa entered a bear market on December 12, 2014, after falling 22 percent from its year-high.

Statistics:

  • 39 stocks in the Ibovespa declined on speculation of austerity measures being undone.
  • Vale SA dropped 2.8 percent to 16.99 reais in its longest losing streak this year.
  • Usinas Siderurgicas de Minas Gerais SA fell to an 11-year low after Moody's Investors Service cut its credit rating.
  • Petrobras gained 2.6 percent to 10.17 reais after releasing its delayed third-quarter results.
  • Trading volume of equities in Sao Paulo was 4.7 billion reais ($1.8 billion) on Monday, down from a daily average of 7.3 billion reais in 2014.

Sources:

  • "Brazil Stocks Decline Amid Speculation of Austerity Measures Being Undone", Bloomberg.
  • "Ibovespa Ends Lower After Sell-Off in Metals and Steel", Bloomberg.
  • "Moody's Cuts Usinas Siderurgicas de Minas Gerais SA Credit Rating", Bloomberg.
  • "Petrobras Posts Delayed Results, With Losses to Be Disclosed", Bloomberg.
  • "Brazil's Ibovespa Enters Bear Market", Bloomberg.