- Ibovespa joins rout in emerging markets as commodities fall
- Investors await for recovery plan by new Brazil government
The Ibovespa fell to a five-week low on concern the Federal Reserve may expedite interest-rate increases before Brazil’s new government is able to rebuild investors’ confidence.
Brazilian stocks joined a broader rout in emerging markets as commodities slumped after minutes from the last meeting of the Federal Open Market Committee showed most policy makers felt that an interest-rate increase would be appropriate in June if the U.S. economy continues to improve.
“The market is reacting to news coming from abroad, clearly reacting to the odds for a rate increase in the U.S.,” said Ignacio Crespo, an economist at brokerage Guide Investimentos. “Investors are watching the developments outside Brazil very closely.”
The Ibovespa fell 0.5 percent to 50,561.70 at the close of trading in Sao Paulo. Thirty-four of its 59 stocks declined, with miner Vale SA and oil producer Petroleo Brasileiro SA among the biggest contributors to the index’s decline.
Investors in Latin America’s biggest economy are also waiting to know what measures new Finance Minister Henrique Meirelles will take to shore up the country’s finances and combat the worst recession in a century. Michel Temer’s administration is still working on a proposal to change this year’s fiscal target as the recession takes a toll on tax collections, with a plan expected to be presented to Congress next week, according to Planning Minister Romero Juca.
"No concrete strategy to put the country back on track has been disclosed up to this point," said Paulo Figueiredo, chief economist at FN Capital in Petropolis, Brazil. "Even when all the cards are on the table, it takes time for the measures to start working."
Meirelles was appointed as the leader of the recovery plan last week by Temer, who is acting president as Dilma Rousseff faces an impeachment trial for alleged breach of budget laws.