IBOVESPA Closes Down 2.8 Percent with Worsened Perception of Coronavirus

RIO DE JANEIRO, BRAZIL – The IBOVESPA closed down on Wednesday, April 1st, with the likelihood of the coronavirus impact on the world’s largest economy being greater than expected. In the United States, where the health crisis is intensifying daily, there are currently nearly 190,000 infections and over 4,000 deaths from the disease.

The pessimism with the escalating situation has cost investors sleep, as they have rushed to more secure assets, causing new stock market casualties. The main index of the Brazilian stock market dropped 2.81 percent, closing at 71,966.70 points.

Investors were also attentive to President Donald Trump’s statements. He had been softer in his approach to the virus, but finally changed his tone. According to him, the next two weeks should be “very tough” for the United States.

On Tuesday, the White House revised its projection on the potential death toll from 100,000 to 240,000. In the US market, the S&P 500 index was down 4.41 percent.

In the morning, data on unemployment and manufacturing production in the United States exceeded expectations and helped to mitigate the downtrend. “The economic data were good, but the US health numbers are weighing more heavily. It’s human instinct,” said Jason Vieira, chief economist at Infinity Asset.

The market is still waiting for the amount of unemployment insurance claims recorded last week, which should be released this Thursday, April 2nd.

As a result of lower risk appetite, 10-year US bond yields plummeted 12.1 percent, with the highest demand for the asset, considered the safest in the world.

In several other countries, drops were also sharp. The negative highlight was the Tokyo stock market, which closed down 4.5 percent. In Europe, the Stoxx 600 index fell 2.91 percent.

“The markets are cautiously assessing the new developments surrounding the Covid-19 outbreak. We believe that a change in trend will only come with greater clarity regarding the control of the virus in Italy, Spain and the United States,” said investment guide analysts in a report.

In the Brazilian stock market, the highest drops in the IBOVESPA were seen in the tourism and aviation sectors, considered the most sensitive to the impacts of the coronavirus. Azul and Gol shares fell 15.39 and 12.23 percent, respectively, while CVC shares retreated 15.32 percent.

Via Varejo ended the day down 11.93 percent. Since the onset of the crisis, market distrust of the company’s ability to make it through the crisis has increased, given its high short-term debt.