Brazilian markets sink after WHO says coronavirus is a pandemic

BRASILIA, March 11 (Reuters) – Brazilian markets plunged on Wednesday, with shares falling 8.5% and the real slipping to its all-time low against the dollar, after the World Health Organization declared the outbreak of coronavirus as a global pandemic.

* Reflecting investors’ scale of risk aversion, longer-term market-based interest rates increased, implying that the Central Bank will eventually be forced to raise the benchmark rate to protect the currency and maintain capital inflows from abroad.

* Stock market trading was suspended for 30 minutes in the afternoon after a 10% drop in the Bovespa benchmark triggered a “circuit breaker”.

* Liquidation intensified after operations resumed, leading the Bovespa to lose up to 12% on the day at 81,000 points. The index closed with an 8.5% drop, accumulating losses so far this year of 27%.

* In dollar terms, the Bovespa is down 36% this year, by far the worst performer among the world’s largest stock markets.

* Meanwhile, interest rate futures as of January 2027 climbed 70 basis points. Even shorter-term contracts like January 2021, which expire when the Selic benchmark rate is likely to be lower than Wednesday’s, rose about 30 basis points.

* In addition, the Brazilian real fell as much as 2% in the session to 4.7579 units per dollar, very close to the recent historical low of 4.7975 reais per dollar. The one-month implied volatility in the dollar / real parity increased to 19.7%, the highest since October 2018.

* In local news, the Brazilian government lowered its projection for economic growth for 2020 to 2.1%. Barclays, UBS and Bank of America Merrill Lynch cut their forecasts below the official estimated figure.

(Report by Carolina Mandl and Jamie McGeever, Edited in Spanish by Manuel Farías)

Written by Argentina News

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