Stocks revert their upward trend in volatile session
After feeling the pinch from Brazil's crisis, which took by storm key markets around the world as officials announced an effective devaluation of the country's currency, the real, market participants consulted by Agência Estado believed at the beginning of today's session that Brazilian stocks could recuperate part of their losses on the back of a mix of bottom-feeding and the approval of key measures in Congress yesterday.
Although bourses did really manage to begin trading in positive territory, as low prices in stocks sparked a bargain-hunting in the market, they reverted at mid-session in volatile trade on rumors that large hedge funds in Brazil are facing difficulties after yesterday's turmoil.
On Wenesday, domestic markets witnessed in commotion "Brazilian Central Banker, Gustavo Franco, a hard-line foe of devaluation, quit abruptly," wrote the U.S.-based the Wall Street Journal in its online version today. "His newly appointed successor, Francisco 'Chico' Lopes, immediately allowed the real to fall in value by 8.3% against the U.S. dollar."
Although, Lopes tried to cool off the crisis by saying his step -- technically, a shift in the "band" tying the real to the dollar -- was an improvement in the forex policy, "rather than a breakdown of it", investors took the lead, and concerns that a major collapse, as well as new devaluations are yet to come, are making them adopt a more cautious attitude.
"If they (Brazilian officials) think that throwing the dogs a bone of a 9% devaluation will make them go home, it won't," former Brazilian Central Bank president, Francisco Gros, was quoted as saying to the newspaper.
Investors are also concerned about the repercussions the country's BC decision may have abroad. In truth, the real plan set in July of 1994 is deeply dependent upon the support of foreign capital, and yesterday alone US$1bn fled the country on fears of a stock market meltdown.
Yesterday, trading in São Paulo was halted after the city's stock exchange index (Ibovespa) tumbled more than 10%, before managing to rebound to end the day down by "only" 5%. (By Paulo R. Monteiro Dias)
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