Brazilian markets dip in aftermath of Brasília riots

Brazil’s benchmark stock index Ibovespa started this week’s trading heading in the opposite direction of international markets, down 0.39 percent at the opening bell following the storming of prominent government buildings in Brasília by far-right radicals on Sunday.

Analysts expect Monday’s session to be one of volatility. Despite opening on a downward trend, the Ibovespa returned to the black less than an hour later, before dropping once again. Around 11 am, Ibovespa was down 0.56 percent at 108,355 points.

The shares of two of the index’s most weighty companies — majors Petrobras and Vale — followed this trend, opening the day in a slump but soon recovering from the losses. 

The Brazilian currency opened the day down by more than 1 percent, but also mitigated the slide after a few hours. At around 11 am, the Brazilian Real had slipped 1.13 percent against the U.S. Dollar, reaching USD 1 : BRL 5.29. Future interest rates, on the other hand, still show strong bumps throughout the curve. 

Speaking to The Brazilian Report, Lucas Lima, analyst at VG Research, points out that Sunday’s invasions undoubtedly increase political uncertainties in the short term, which harms markets. However, for the medium term — that is, throughout the week — the expectation is that yesterday’s events will dissipate and lose strength.

“However, the attacks take the focus away from what really matters, which is the discussion of the economic agenda,” says Mr. Lima. 

Brazil’s Finance Minister Fernando Haddad was expected to participate in a press conference alongside Labor Minister Luiz Marinho this Monday to discuss the increase of the minimum wage to BRL 1,320, an engagement now likely to be postponed. 

The minimum wage bump was a campaign promise of President Luiz Inácio Lula da Silva, but some economists question the availability of resources to make it happen.

• #stockMarket