Brazil’s Stock Market Reopens Down Seven Percent as Coronavirus Advances

RIO DE JANEIRO, BRAZIL – The Brazilian Stock Exchange has returned from the Carnaval holiday in sharp decline amid confirmation of the first case of the coronavirus in the country and the spread of occurrences around the world.

The Brazilian markets reopened on Wednesday afternoon – after two days closed – with IBOVESPA, the main reference index, down by seven percent to 105,718 points at the end of the day. All the shares that make up the index operated in the red.

The drop in the Brazilian stock market is the highest since the so-called ‘Joesley Day’, the day on which the recording of conversations between JBS owner Joesley Batista and former president Michel Temer about alleged irregularities was released, bringing down the Brazilian financial market by 8.8 percent in May 2017.

The risks of the impacts of the new virus on the economy were also reflected in the exchange rate on Wednesday. The commercial dollar closed up 1.15 percent, quoted at R$4.44, a new record. The appreciation of the US currency occurred despite the Central Bank’s announcement earlier on Wednesday of the sale of US$500 million in the futures market to secure the exchange rate variation.

In recent days, a wave of cases of the disease has spread throughout the world, particularly in Italy, South Korea, and Iran. On Tuesday night, Brazil announced its first case of a person infected with the new coronavirus (Covid-19) in a patient from São Paulo who has recently returned from a trip to Italy. The case, confirmed on Wednesday by the authorities, occurs one day after the World Health Organization (WHO) alerted to the risk of a global coronavirus pandemic.

Asia also reported hundreds of new cases of coronavirus on Wednesday, including the first American soldier to be infected, and the United States warned of an unavoidable pandemic. Stock markets plummeted around the world for the fifth day, gold prices rose again, approaching seven-year highs, and US bond yields came close to record lows. In the United States, stock markets soared on Wednesday after dropping more than six percent earlier in the week, but the indices then returned to the red.

The World Health Organization (WHO) estimates that China has recorded a total of 77,780 cases of coronavirus, among them 2,666 deaths. The number of cases is rising more slowly in China, but outside the country, there are now 2,459 cases in more than 33 countries, which have already accounted for 34 deaths.

According to Pablo Spyer, director of Mirae brokers, the volatility of financial markets has increased worldwide, and the epidemic has already lit the yellow caution light of the world’s major economies. “There is no way to predict the unfolding of events, but several institutions around the world are lowering their forecast of global GDP for this year. We will experience volatility in the coming days,” he explains.

Brazil already estimates lower growth

Financial market analysts this week lowered the Brazilian economy’s growth estimate. According to the Focus bulletin – which includes the projection of more than 100 institutions – the 2020 GDP forecast dropped from 2.23 to 2.20 percent. This was the second consecutive drop in the indicator.

According to Itaú bank, the Brazilian economy growth estimate may be adjusted downwards in the coming weeks if the disease continues to spread around the world.

“The most intense external risk [for the Brazilian economy] is the coronavirus and the measures to contain it. If it’s a whole semester, it will have an impact on the global and Brazilian GDP,” Mário Mesquita, the bank’s chief economist, said in a press conference in São Paulo on February 19th.

Source: El Pais