O Ibovespa (IBOV) sank nearly 4% this Wednesday, marking the biggest daily drop in six months, reflecting concerns about the country’s economic agenda in the face of increased political-institutional tension, following statements by the president Jair Bolsonaro during demonstrations on Independence Day the day before.
Reference index of the Brazilian stock market, the Ibovespa closed down 3.78%, 113,412.84 points, the lowest closing since March 24th and the biggest daily percentage loss since March 8th. The trading volume in the trading session totaled 36.9 billion reais.
Thousands of people participated in acts convened by Bolsonaro on September 7th, marked by attacks on ministers of the Supreme Court (STF), with the chief executive threatening to fail to comply with court orders.
The president’s speeches raised the bar for discussions in the political class, with parties condemning the statements and some promising to monitor upcoming events to assess possible support for an impeachment process against the president.
The president of the STF, Luiz Fux, also reacted with a critical tone this Wednesday on Bolsonaro’s statements, while the president of the Chamber of Deputies adopted a less harsh bias.
Even considering that the chances of an impeachment remain low, analysts drew attention to an increase in the institutional impasse, which could hinder negotiations for reforms such as tax and administrative reform in Congress, in addition to hindering discussions on issues such as court orders, among other consequences.
“The political noise has increased considerably… The investor has no confidence and, when in doubt, sells,” said the partner and economist at VLG Investimentos, Leonardo Milane.
For him, the tone of Bolsonaro’s speeches signal that the situation should not improve overnight. “It doesn’t look like he’s about to have a tea of conscience and start rephrasing what he said; on the contrary, the political temperature has warmed and will remain warm longer.”
The negative reaction also contaminated the foreign exchange market, with the dollar rising 2.84%, at 5.3236 reais, the biggest increase since June of last year, as well as the rates of DI contracts, with a strong increase in the inclination of the future interest rate curve in the country.
“The national political scenario has returned to concern and risk aversion has taken over”, said the analyst at Aware Investments Aldo Filho, adding that the distance between the Powers brings apprehension, “whose synergy is necessary for the approval of relevant measures for fiscal control ”.
The negotiations also took on the backdrop of declining US trading sessions, with fears about the effects of Covid’s Delta variant on economic recovery and uncertainty about when the Federal Reserve’s next steps.
finds (RENT3) and UNITED (LCAM3) soared 8.03% and 7.23%, respectively, after the General Superintendence of the Administrative Council for Economic Defense (Cade) recommended the approval of the merger of the two companies with the adoption of remedies that mitigate competitive risks, which analysts considered more milder than expected.
Itaú Unibanco (ITUB4) fell 4.74% and Bradesco (BBDC4) retreated 5.76%, amid the risk-averse environment, after the demonstrations on the eve reinforced prospects for demobilization of economic agendas. In the financial sector, B3 (B3SA3) collapsed 8.38%.
Petrobras (PETR4) lost 5.63%, detached from the rise in oil prices abroad, also suffering from the tense climate in the local scenario. Also on the radar are demonstrations on federal roads in southern Brazil that are punctually blocking truck traffic this Wednesday.
Valley (VALLEY3) retreated 2.08%, suffering from adjustments to the 1.9% decline in its ADR the day before in New York, in another session of decline in the mining and steel sector, with another session of weakness in iron ore prices .
Usiminas (USIM5) dropped 5.74%, with data from the Brazilian automotive industry also on the radar.
Meluze (CASH3), which entered the Ibovespa this week, fell 11.36%, at 31.20 reais. Company shareholders recently approved a 1 to 6 share split.
The shares will be traded ex-split from Friday. Since the peak at the end of July, the stock has accumulated a drop of almost 60%.
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