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Brazil Stocks Hit Another Circuit Breaker as Rout Deepens

Vinícius Andrade
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Brazil Stocks Hit Another Circuit Breaker as Rout Deepens

(Bloomberg) -- Brazilian stocks triggered a circuit breaker for the fifth time in six sessions, tumbling with global equity markets as investors doubt if emergency moves from central banks are enough to soften the economic hit from the coronavirus pandemic.

The benchmark Ibovespa equity index slumped 12.5% Monday morning and prompted the exchange to halt trading for 30 minutes, before paring losses. It fell 9.6% as of 12:05 p.m. local time, while the currency dropped 1.9% to 4.9346 per dollar.

Locally, nerves are on edge over the government’s handling of the crisis and growing tensions between the president and Congress. President Jair Bolsonaro joined hundreds of supporters in a pro-government protest in Brasilia on Sunday, three days after suggesting they could be canceled because of the virus spread. Lower house speaker Rodrigo Maia called Bolsonaro’s actions an attack on public health and criticized him for ignoring the guidance of his own administration.

The Ibovespa is down more than 37% since its peak in late January. The recent turmoil has sent volatility soaring and compressed multiples to historically low levels.

Though some prices look attractive, Luciano Brandao, head of equity at BlueLine Asset Management, said he’s still “in defensive mode.”

“An announcement of fiscal measures -- which could provide relief to smaller companies and individuals during this uncertain period -- could signal that the tide is turning,” he said.

Airlines Azul SA and Gol Linhas Aereas Inteligentes SA were down more than 18% each. Shares of travel agency CVC Brasil Operadora e Agencia de Viagens SA hit the lowest intraday in more than four years. Smiles sank more than 30% after Gol canceled the plan to reorganize the loyalty program company amid fallout of “extraordinary events” of the past few days and “the strength of its structural impacts in the aviation sector.”

Stock bulls in Latin America’s largest economy have been trimming their expectations after a record-setting rally that stood out last year. On Friday, Morgan Stanley cut its 2020 year-end target for the Ibovespa to 85,000 points from 125,000. The bank’s bear case sees the index at 65,000 points by the end of the year.

Economists in a weekly central bank survey released Monday slashed estimates for 2020 growth to 1.68% from 1.99%.

(Updates assets move throughout, adds investor comments in fifth paragraph.)

To contact the reporter on this story: Vinícius Andrade in São Paulo at vandrade3@bloomberg.net

To contact the editors responsible for this story: Courtney Dentch at cdentch1@bloomberg.net, Julia Leite

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