The Brazilian Stock Market Falls 0.99% Amid Uncertainty Over Government Adjustments
The São Paulo stock exchange closed 0.99% lower on Thursday, as investors await the Brazilian government’s announcement regarding the scale of spending cuts to balance public accounts.
The Ibovespa, the benchmark index for Latin America’s largest stock market, ended the session at 126,922 points, after remaining closed on Wednesday due to a public holiday.
President Luiz Inácio Lula da Silva’s administration is under pressure from financial markets to reduce expenditures in response to a growing nominal deficit, which stood at 9.34% of GDP in September.
In the currency market, the U.S. dollar rose by 0.75%, closing at 5.81 reais for both buying and selling in the commercial exchange rate.
The day saw mixed performances from major stocks. Shares of the state-controlled oil company Petrobras gained 0.26%, while mining giant Vale saw a slight decline of 0.10%. Meanwhile, the biggest losses were recorded by retailer Americanas, which dropped 16.7% as it continues its debt restructuring process, and education firm Bahema, which fell 16.1%. On the other hand, airline Gol and construction company Viver posted strong gains of 13.3% and 7.2%, respectively.
The total trading volume surpassed 22 billion reais (approximately $3.8 billion or €3.6 billion), with more than 4.4 million transactions recorded.
Broader Economic Context
The market downturn coincides with a sharp depreciation of the Brazilian real, which has lost 18% of its value over the past year. The USD/BRL exchange rate has climbed significantly, contributing to rising inflation and poverty levels in the country. However, the weaker real has also led to a record influx of tourists visiting Brazil’s beaches.
There is speculation that Brazil’s central bank may step in to support the currency by selling dollars from its reserves. However, this approach may prove unsustainable, as the country faces fiscal challenges and relies heavily on debt to cover its deficit. This situation bears similarities to the economic struggles experienced by other nations in the region, such as Argentina.
The real closed the day at 5.81 per dollar, with increased volatility. Key technical levels suggest strong support at 5.6 and significant resistance at the psychological threshold of 6.0 per dollar.
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