Brazil's Stock Rally Evaporates as Petrobras Tumbles With Crudeby
Oil company declines as commodity trades at six-year low
Ibovespa's volatility at four-week high amid political crisis
The rally in Brazilian stocks fizzled as a rout in commodities sent oil producer Petroleo Brasileiro SA tumbling and political turmoil added to concern it’ll be harder for Latin America’s largest economy to rebound.
Energy and raw-material stocks were among the worst performers on the MSCI Brazil Index, while lenders Itau Unibanco Holding SA and Banco Bradesco SA slumped. Meatpacker JBS SA rose as a weaker real bolstered the outlook for exports. The Ibovespa’s 30-day volatility touched a four-week high before a Congress decision on whether to accept nominations for a committee that will oversee early stages of President Dilma Rousseff’s impeachment process.
“There’s a lot more bad news than good news for Brazil’s stock market,” said Ignacio Crespo, an economist at brokerage Guide Investimentos. “We should expect more volatility.”
Brazilian shares have tumbled 22 percent from their peak in May as the government struggles to revive an anemic economy amid political uncertainties, the threat of higher U.S. interest rates and a plunge in commodities. The slide in oil to the lowest level in more than six years Monday spurred a rout in energy-related shares around the globe. The selloff was intensified by speculation the Federal Reserve will boost borrowing costs on Dec. 16, reducing the appeal of emerging-market assets.
The Ibovespa dropped 0.3 percent to 45,222.70 at the close of trading in Sao Paulo, after earlier rallying as much as 1.8 percent. Petrobras, as the state-controlled oil producer is known, slumped 4.4 percent as a decline in crude below $38 a barrel dimmed the outlook for its offshore investments.