(Recasts, updates closing prices, adds detail)
By Jamie McGeever
BRASILIA, March 20 (Reuters) – Brazilian stocks fell on Friday, rounding off the steepest weekly fall since the Great Financial Crisis and the third largest in 30 years, as gloom deepened surrounding the coronavirus-hit domestic and international economic landscape.
Brazil’s benchmark Bovespa index closed 2.3% lower at 66,750 points, wiping out earlier gains and bringing the week’s decline to 19%. That was the biggest weekly loss since October 2008 and the third largest in three decades.
Brazil’s real strengthened slightly, briefly trading through 5.00 per dollar. But it still ended the week down more than 3%, and has now appreciated in only one week out of the last 12.
Long-dated interest rate futures, a barometer of investors’ risk appetite and so-called “Brazil risk”, rose slightly, with January 2027 contracts nudging 9% and January 2029 contracts trading above 9% .
The session had started on a strong footing as the trillions of dollars of global fiscal and monetary stimulus coming down the pipe to mitigate the coronavirus shock tempted investors to take on a little more risk.
But a raft of downward revisions to Brazilian and U.S. growth forecasts, as more countries went into anti-coronavirus lockdown mode, darkened the mood.
“It is difficult to be optimistic,” Citi’s emerging market team wrote in a note on Friday.
“The virus threatens an economic collapse in emerging markets regardless of financial channels … and there is some early evidence of an unprecedented collapse in global capital mobility” which could ultimately prompt capital controls.
The real got some support from another round of central bank intervention as it sold $175 million in the spot market, helping it outperform other emerging market currencies although not enough to push the dollar firmly below 5.00 reais.
Commodity Futures Trading Commission data on Friday showed that funds and speculators on U.S. futures markets reduced their net short Brazilian real positions by the most since January, even as the currency slid towards a record low 5.25 per dollar.
But given the scale of the economic and financial crisis the global coronavirus outbreak has unleashed, investors remain on edge.
“Hedges are not working, liquidity (has) disappeared and markets are paralyzed,” Bank of America Merrill Lynch emerging market analysts wrote in a note.
“The good news is that policymakers are already taking note and acting accordingly … (but) we remain conservative waiting for markets to stabilize before taking advantage of the several dislocations,” they said. (Reporting by Jamie McGeever and Luana Maria Benedito; Editing by Kevin Liffey, Marguerita Choy and Daniel Wallis)
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