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BRAZIL: Ibovespa Falls With Fiscal Target And Geopolitical Tension

(Agencia CMA Latam) - Ibovespa, the benchmark stock index in Brazil, closed down 1% at 66,992.09 points Thursday, reflecting investors' fears that the government might miss its fiscal targets for 2017 and 2018 and amid mutual threats between the United States and North Korea.

According to Pedro Galdi, an analyst at Magliano Corretora, Brazil's Finance Minister Henrique Meirelles said that a revision of the fiscal target would occur in September, but there are reports that the announcement would come sooner.

"The speech is not coherent. Moreover, it is not known if the target will indicate a primary deficit greater than R$ 159 billion, which could make rating agencies lower Brazil," he added.

For Ignacio Crespo, an economist at Guide Investimentos, the geopolitical tension was the primary catalyst for the Ibovespa's downturn.

"Although the fiscal issue is worsening, there is greater risk aversion, which can be seen in the rise in emerging market credit default swaps," he said.

Meanwhile, the US currency has strengthened as investors around the world position themselves defensively to respond to the geopolitical tension involving the U.S. and North Korea. Discussions on a loosening of this year's fiscal target helped to consolidate the positive bias. The locally traded US dollar rose by 0.76%, at R$ 3.1760.

Galdi said that the market would react Friday to Petrobras' results.

"If the operational figure comes in well, the market can pull up," the analyst said. Crespo said the index's trend is to stay on the negative field tomorrow. "The geopolitical issue will permeate more sessions because it will be difficult to resolve in the very short term," he said.

by Agencia CMA Latam

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