Brazilian Stocks, Real Surge on Bets Impeachment Gaining Supportby and
Vote to create impeachment committee seen as blow to Rousseff
State-controlled companies lead gains on ouster speculation
Brazilian stocks led world gains and the real advanced amid speculation efforts to impeach President Dilma Rousseff are gathering support and may be the most likely way to end a months-long political stalemate.
The lower house, in a secret vote Tuesday night, created a committee that’s made up mostly of opposition lawmakers to evaluate the request to oust Rousseff and recommend whether hearings against her should begin. It was seen as a defeat for the president, who has sought to win over enough legislators to stop the proceedings. Many investors now say an impeachment of Rousseff may be the only way to resolve the gridlock in Brasilia that has diverted the nation’s focus from fiscal and economic measures aimed at boosting growth.
"Brazil’s situation only gets worse as we’re stuck in this turmoil," Jason Vieira, chief economist at Infinity Asset Management, said from Sao Paulo. "Investors now believe there’s a higher chance that the president will be removed from her post."
The Ibovespa added 3.7 percent to 46,108.03 in Sao Paulo. The real gained 1.2 percent against the dollar to 3.7523, the best performance among 24 emerging markets currencies tracked by Bloomberg after Bulgaria’s lev. One-month implied volatility dropped to 20.08 percent, still the highest among 16 major currencies tracked by Bloomberg.
State-controlled companies led gains with oil producer Petroleo Brasileiro SA’s voting shares was the best performer on Brazil’s benchmark. Lender Banco do Brasil SA climbed 8 percent and Centrais Eletricas Brasileiras SA, the utility known as Eletrobras, rose 2 percent.
Exporters and the currency also got a bounce as commodities rallied. Iron-ore producer Vale SA rose 2.9 percent, the most in a month on a closing basis, as the S&P GSCI commodity index climbed for the first time in four days.
Supreme Court Justice Luiz Edson Fachin decided shortly after the lower-house vote Tuesday to suspend the creation of the committee for a week. The longer it takes to decide whether to move ahead with impeachment, the greater chance there is Rousseff will lose more support in Congress, said Joao Paulo de Gracia Correa, a foreign-exchange director at SLW Corretora de Valores.
"Investors are betting that impeachment is the best way now and any evidence that it is moving closer is positive," he said from Curitiba, Brazil. "We need changes and sometimes it doesn’t matter much how painful they can be in the shorter term."
Brazil’s sovereign rating was put on review for a downgrade by Moody’s Investors Service, which cited the deterioration of the economy and increased risk of policy paralysis.
Swap rates on the contract maturing in January 2017, a gauge of expectations for interest-rate moves, declined 0.07 percentage to 15.71 percent.