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Worst Day in 21 Years Sends Brazil Stocks Into Bear Market

Vinícius Andrade and Aline Oyamada
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Worst Day in 21 Years Sends Brazil Stocks Into Bear Market

(Bloomberg) -- Brazilian assets began the week in meltdown mode, with the currency tumbling to a record low and stocks entering a bear market as tumbling oil prices added to coronavirus-fueled jitters.

The benchmark equity index, which is down 28% since its January peak, slid 12% on Monday, the biggest drop in 21 years. A circuit breaker was triggered just 31 minutes into trading and Petroleo Brasileiro SA plunged the most ever.

Assets in Latin America’s largest economy mirrored turbulence across the globe. Volatility has reigned as the coronavirus outbreak has infected more than 108,000 people. Adding to the carnage, Saudi Arabia triggered an all-out oil price war, causing crude to crash more than 30% at one point.

“Markets seem to be pricing a global recession,” said James Gulbrandsen, chief investment officer for Latin America at NCH Capital.

All stocks in Brazil’s Ibovespa index fell at least 3% in the worst crash since the Russian crisis in 1998. Petrobras led the drop along with steelmakers and retailers including Magazine Luiza SA and Via Varejo SA.

The Brazilian real, the world’s worst performer this year, weakened 2% to a record 4.7224 per dollar even as the central bank stepped in to support the currency. Policy makers in the morning increased a spot dollar auction to $3 billion from $1 billion announced on Friday and sold an additional $465 million in the afternoon. After markets closed, the central bank said it will hold a $2 billion auction on Tuesday.

Brazil’s five-year credit default swap widened 56 basis points, the most since 2008. The country risk measure reached 199 basis points, the highest in more than a year.

“It’s time to get on stand-by mode,” said Christian Keleti, the Sao Paulo based chief executive officer and portfolio manager at Alpha Key Capital Management.

(Adds stocks moves, new intervention in fifth and sixth paragraphs and analyst comment in last paragraph.)

To contact the reporters on this story: Vinícius Andrade in São Paulo at vandrade3@bloomberg.net;Aline Oyamada in Sao Paulo at aoyamada3@bloomberg.net

To contact the editors responsible for this story: Courtney Dentch at cdentch1@bloomberg.net, Jessica Brice, Brendan Walsh

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