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The Accumulator: bulls return to Brazil as stocks rocket

Brazilian stock market chalks up latest leg in astonishing rally, as corruption scandal threatens to engulf president Dilma Rousseff.

 

by Sam Antrobus on Mar 11, 2016 at 17:58

The Accumulator: bulls return to Brazil as stocks rocket

Brazilian stocks were galvanized by a potentially landmark move from its country’s prosecutors this week, with an ever-strengthening oil price capping a great week for investors in the South American country.

As our exclusive Accumulator data table shows, the MSCI Brazil index rose a stunning 8.5% in pound terms in the five days to yesterday, as money-laundering charges filed against former president Luiz Inacio Lula da Silva led to speculation the move could lead to the ousting of president Dilma Rousseff, blamed by some for Brazil's economic woes.


The index is now up just over 30% for the rolling month, against the backdrop of growing bullishness on South American markets, following moves this year by recently elected President Mauricio Macri to reform neighbouring Argentina’s economy.

Alongside a resurgent Brazilian real that hit a six-month high against the dollar, the country’s benchmark Bovespa index also hovered near its highest mark for seven months, rising as much as 2.7%.

The performance of Brazilian indices can be closely aligned with oil prices, and this week was another positive one for the Brent crude – up 6.5% for the week and just over 33.6% for the month.

Comments made by the International Energy Agency suggesting that the oil price may have now bottomed out helped oil to its third weekly gain, and it is now up 5.7% for the year, up from 12-year lows in January.

Oil export-reliant Russia was naturally another key beneficiary, with the MSCI Russia index rising 3.4% and the wider MSCI Emerging Markets benchmark up 0.3%.

Developed markets endured a more volatile week. While European Central Bank (ECB) president Mario Draghi pleased investors by announcing an extension to its stimulus efforts on Thursday, any positive effects on markets was quickly undone after he indicated that the latest round of interest rate cuts could be the last.

European and UK markets fell into the red, as shown by the losses in our table, which covers the week to yesterday. Yet once the dust settled on the ECB’s quantitative easing expansion, stock markets rallied today, erasing those losses.

Sterling also appeared to stop the rot after a month in which the currency has been plagued by Brexit concerns. Against the dollar, the pound rose to its highest in nearly three weeks.

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