IBOVESPA Cuts Losses to 12 Percent and Pulls Away From Second Halt

RIO DE JANEIRO, BRAZIL – The Brazilian stock market was once again in decline after trading was halted at 1:18 PM, when the IBOVESPA, the B3’s main stock index, dropped by 10.26 percent. The downtrend occurred amid another wave of global pessimism regarding the economic impacts of the Covid-19 coronavirus pandemic.

This was the sixth time that the circuit breaker was triggered in Brazil since last week. It interrupts trading for half an hour so that investors may prevent an uncontrolled sale of stocks.

After the trading session was resumed, the main B3 index increased its losses even further. At 4:24 PM, the Ibovespa was down by 12.63 percent to 65,066 points. Should the index drop by 15 percent, the session will be interrupted until the end of trading.

On Wednesday, US President Donald Trump said that “in the worst-case scenario,” the unemployment rate in the United States could reach 20 percent, which speeded up losses in the world’s stock markets. Trading also had to be interrupted earlier in the afternoon, when the S&P 500 index hit a low of 7.01 percent. Just like Brazil, the US stock markets dropped again in the reopening of trade.

Around the world, despite several economic stimulus measures announced by governments and central banks, the stock markets plunged because of uncertainty over the extent of the deceleration that the pandemic will cause.

“There is very strong pressure in the markets on the possibility of a global GDP (Gross Domestic Product) recession,” he said. Alvaro Bandeira, chief economist of digital bank Modalmais. For the economist, the markets will only react positively again when the curve of coronavirus-infected people starts to level off. “When the situation starts improving in Europe, the markets will calm down.”

Rafael Bevilacqua, the chief strategist of Levante Investments, described the current scenario as “irrational”. “Nothing explains climbing ten percent in one day and dropping ten percent in the next.” According to him, this high volatility should last at least 30 to 40 days.

Since mid-February, when the IBOVESPA peaked at a historic 119,000 points, the main stock market index has accumulated a drop of over 40 percent. Victor Beyrutti, an economist at Guide Investments, believes there is still room for further decline. “It will take one or two months to start seeing some improvement, but we shouldn’t see the IBOVESPA far below 65,000 points”.

On the stock market, Azul and CVC shares were once again among the lowest, dropping 30.1 and 23.5 percent, respectively. The tourism and aviation sector is seen as the most sensitive to the progress of the coronavirus in Brazil, since the risk of contagion reduces the flow of people.

The highest drop in the session was for Via Varejo, Casas Bahia and Pontofrio retail brands, which were down 33 percent, traded at R$4.71. In February, the assets closed at R$16.64.

Conversely, Carrefour Brasil supermarket chain shares led the IBOVESPA’s highs, rising 0.8 percent. According to Bevilacqua, in the short term, the company may benefit from the current scenario. “Something surreal is happening in supermarkets. People are stocking food”.

Source: Exame