Brazil’s Ibovespa deepens losses and falls 3% with reaction to Bolsonaro’s September 7 speeches

RIO DE JANEIRO, BRAZIL – At 2:39 PM, shortly after the expected statement by the president of the Chamber, Arthur Lira, about the acts and during a speech by the president of the STF, Luiz Fux, Ibovespa accentuated the losses, with a fall of 3.04%, to 114,289 points.

This score is the lowest since March. The spot dollar, meanwhile, accentuated the highs of earlier trading, advancing 2.45% to R$ 5.263.

Operators heightened caution after a new criticism by President Jair Bolsonaro of Supreme Court Justices Alexandre de Moraes and Luís Roberto Barroso, who is also president of the Superior Electoral Court (TSE).

The new criticism occurred during the Independence Day holiday when Bolsonaro participated in political acts in Brasilia and São Paulo, and now investors are watching the reactions of Congress and the Judiciary.

A possible impeachment of President Jair Bolsonaro has already been discussed by several parties that so far do not systematically oppose the government but that condemned Bolsonaro’s speeches on September 7.

This behavior reflected the assessment of a good part of the markets, that Bolsonaro’s inflammatory speech contributes to the worsening of institutional tension in Brazil, which could negatively affect economic performance.

Tuesday’s events show that Bolsonaro “still has plenty of popular support and remains an important character in the political/electoral scenario,” but, “on the other hand, the institutional environment should become even tenser,” wrote analysts at Genial Investimentos. “The result will be more uncertainty and volatility, and probably less growth and more inflation.”

Further undermining the Brazilian currency’s performance, the mood abroad was also cautious amid fears of slowing economic growth as investors monitored the outlook for stimulus from the Federal Reserve, the European Central Bank (ECB), and the People’s Bank of China.

The local risk assets “will not be able to count on the good mood abroad to ease fears with the situation of several uncertainties that the country is experiencing,” said Victor Beyruti, an economist at Guide Investimentos, in a note.

The dollar index against a basket of currencies rose 0.1% this morning, while Wall Street futures traded in the red.