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Junk-Rating Dread Roils Brazilian Markets as Bank Shares Tumble

  • Real declines to lowest level in 12 years as bond risk surges
  • Itau, Bradesco lead losses in stocks, while Petrobras climbs
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The real sank to a 12-year low and the Ibovespa sank on speculation that Latin America’s largest economy is struggling to put its finances in order and avoid a credit-rating cut to junk. Brazil’s bond risk traded near the highest level since 2009.

The equity gauge extended the worst monthly slide in 2015, led by banks, after President Dilma Rousseff was said to have abandoned the idea of reviving a tax on financial transactions to boost revenue. Brazil’s government cut its estimate for budget savings for the second time this year, forecasting a deficit for 2016 as Congress steps up its opposition to tax increases and spending reductions. Stocks also slumped on renewed concern that China, Brazil’s top trading-partner, will fail to revive its economy.