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Brazil Stocks Sink, Trigger Second Circuit Breaker This Week

Vinícius Andrade

(Bloomberg) -- Brazilian stocks triggered a circuit breaker for the second time in three days, sinking with markets across the globe after the World Health Organization declared the coronavirus outbreak a pandemic.

The benchmark Ibovespa equity index slumped 10% on Wednesday afternoon, prompting the exchange to halt trading for 30 minutes. The same had happened Monday, when a jaw-dropping slump in oil prices sent the index into a bear market, erasing 14 months of gains. The real slumped more than 3.3% as of 5:55 p.m. in Sao Paulo, reclaiming the post of worst currency in the world in 2020.

The move comes as global stocks plunge, oil tumbles and demand for havens spikes after the WHO said cases outside China have risen 13-fold and declared it a pandemic. The announcement and no plans from President Donald Trump to combat the virus’s impact on the economy rattled markets, threatening to end the Dow Jones Industrial Average’s longest bull market on record.

The carnage in Brazilian markets has stood out even amid the global sell-off. Even posting its best day in a decade Tuesday, the Ibovespa is down 15% this week, and has lost more than a third of its value since peaking in late January. The swings have sent two-month implied volatility to the highest level since at least 2014, according to data compiled by Bloomberg.

It’s still early to call a bottom, according to AllianceBernstein’s portfolio manager Morgan Harting. “A stabilization in the number of new cases would probably be taken well, as would additional stimulus measures by large economies,” he said.

So far, Brazil has refrained from announcing any stimulus measures. The central bank has signaled it will resume rate cuts at its next meeting next week, which put additional pressure on the currency as it erodes its carry appeal. The real is down 16% this year.

On Tuesday evening, Economy Minister Paulo Guedes sent a letter to the leaders of Congress asking that they prioritize the vote on economic agenda projects “considering the worsening international crisis due to the spread of the coronavirus and the need to shield the Brazilian economy.”

The Ibovespa fell 7.6% in Sao Paulo. Airlines Azul SA and Gol Linhas Aereas Inteligentes paced losses, falling at least 15% each. Miner Vale SA and lender Itau Unibanco SA contributed the most to the Ibovespa’s decline.

(Updates with currency from second paragraph)

--With assistance from Peter Millard.

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, Jessica Brice

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