Why Are Brazilian Stocks PBR, VALE Down Today?


  • Many Brazilian stocks are down today as the dust settles from a political riot.
  • Brazil is still recovering from the run on some of its government buildings.
  • The country’s currency and stock futures have fallen in response.
The Brazilian flag with the sun in the background
Source: Shutterstock

Brazilian stocks are falling today in response to a recent political uprising. On Sunday, Jan. 8, thousands of Brazilian protestors staged a riot in response to the recent election of Luiz Inácio Lula da Silva (Lula). The protestors stormed multiple government buildings in the capital of Brasília. This led to a clash with military police as angry protestors vandalized the Supreme Court, presidential offices and more.

These supporters of former Brazilian President Jair Bolsonaro have since been successfully cleared out, but the dust is still settling. Brazil’s economy has been shaken by the turbulent event and financial markets are struggling. Now, many Brazilian stocks are starting the week in the red. Today marks the first trading day since the riots and Brazil’s stock market, the Bovespa, has been highly volatile.

How should investors be looking at this important event and what should they expect from Brazilian stocks in the days ahead? Let’s take a closer look.

What’s Happening With Brazilian Stocks?

In response to the riots, many Brazilian stocks are down across the board today. This morning, Petroleo Brasileiro (NYSE: PBR) plunged as markets opened., with shares now fluctuating slightly between red and green. Meanwhile, Brazilian financial institution Banco Bradesco (NYSE:BBD) and mining company Vale SA (NYSE:VALE), which operates in a profitable space, are both in the red by less than 1%

This all makes sense when we consider the volatility of Brazil’s primary stock index. The Bovespa started the day by dropping, only to rise and then fall again. It is currently in green by less than 1%. This activity makes it hard for investors to predict where it will go next as Brazil recovers.

That said, the riots may not pose a lasting effect on Brazil’s economy and financial markets. Reuters reports that the country’s currency weakened only 1% against the U.S. dollar in spot trading. Some experts have speculated that, while the riots have generated significant media coverage, they will not likely push Brazilian stocks down for long. An economist note from JPMorgan says the following:

“Considering the enormous coverage the event got and the surprise we all had, markets should react negatively, but this should be short term […] As day-to day government work resumes, attention should go back to the macro issues that have been top of mind.”

Analysts from Brazilian broker XP Investimentos have issued a similar take. They expect “a limited effect on Brazilian assets,” even following the negativity of the riot.

What Comes Next

It’s also important to note that both the Bovespa and the Brazilian Real responded negatively to Lula being sworn into office in early January 2023. Potential increased spending under the new president has led to some uncertainty throughout Brazil’s financial sector. Many Brazilian stocks fell in response, not rebounding until a few days after Lula’s inauguration.

As of now, it’s unclear how the recent riots will affect Lula’s economic policy agenda, if at all. Brazilian stocks will likely shake off the current turbulence fairly quickly, but how they will fare under a new administration remains to be seen.

On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Article printed from InvestorPlace Media, https://investorplace.com/2023/01/why-are-brazilian-stocks-pbr-vale-down-today/.

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