Brazil’s Ibovespa closes down 3.39% with only 2 index stocks rising; oil plunged over 10%

RIO DE JANEIRO, BRAZIL – In one day Ibovespa lost everything it had accumulated over 3 sessions – and then some. The Exchange index had its second worst closing of the year and ended the trading session with its largest daily drop in over a month.

The list of negative results doesn’t stop there: with yesterday’s performance, the index marked what should be another negative month, with only 2 sessions left in November.

The stock market lacked any kind of support in yesterday’s session. Global markets plummeted with the revelation of a new Covid-19 variant, a strain dubbed Omicron, and which may be more contagious due to its mutations.

For now the World Health Organization (WHO) has classified the strain as “of concern.” This was enough for several countries to restrict flights from Africa, where the variant is said to have originated, and from other nations with confirmed cases.

“Lockdowns in Europe were already underway, which definitely raised market concerns about the potential for further restrictions, an economic slowdown, and even a recession. This is the argument the market is embracing,” said Finacap CEO Luiz Fernando Araújo.

Commodities also accompanied the decline in stock markets, mainly oil, which registered its largest drops since the start of the pandemic. The barrel of Brent oil, used as a price reference by Petrobras (PETR3;PETR4), fell 11.5% to US$71.59; the WTI fell 13.06%, to US$68.15.

Consequently, shares of the Brazilian state-owned company, which had been lending some support to Ibovespa in recent days, plummeted, wiping out gains obtained after the announcement of its investment plan. But they were not the only ones. Only 2 stocks closed yesterday’s session slightly up: Suzano (SUZB3), up 0.15%, and Taesa (TAEE11), up 0.11%. Both fluctuated between losses and gains until the last minute of the day.

With no relevant indicators on the domestic agenda and with the Court-ordered federal debt proposed constitutional amendment (PEC) on hold, not knowing if the issue will be voted on next Tuesday as initially planned, investors were caught off guard.

The session was expected to be a calm one, as the New York Stock Exchanges had a reduced schedule yesterday after the Thanksgiving holiday. The attention that should have been directed to retailers, with Black Friday, was dissipated into a widespread slump that left shares of Brazilian companies even more undervalued than they already were.

The Ibovespa closed down 3.39% at 102,224 points. In the week, the index accumulated a drop of 0.78%. The Ibovespa futures for December 2021 traded down 3.79%, at 102,395 points, in the last business of the day.

The dollar closed up 0.55%, at R$5.595 to buy and R$5.596 to sell. In the week, the U.S. currency accumulated a slight drop of 0.25%. The future dollar for December 2021 is trading up 0.69% at R$5.609 in aftermarket deals.

Concerns over further lockdowns raised the prospect of deflation, bringing down contracts in the futures market. In the extended session, the DI for January 2023 fell 19 basis points to 11.88%; the DI for January 2025 dropped 17 basis points to 11.68%; and the DI for January 2027 was down 15 basis points to 11.63%.

In New York, the Dow Jones index suffered its worst daily drop this year, down 2.53% at the close; the S&P 500 closed down 2.27% and Nasdaq, which had been losing less throughout the day, extended its losses and closed down 2.23%.

The European stock markets were even more penalized. The Stoxx 600 index, which comprises companies from key sectors in 17 European countries, closed down 4.74%. The DAX index, in Frankfurt, fell 4.22%; the FTSE 100, in London, fell 3.68%; the CAC 40, in Paris, retreated 4.75%; the IBEX 35, in Madrid, saw the largest drop, of 5.03%; and the FTSE MIB, in Milan, fell 4.59%.