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Are The Markets Heralding The Post-Crisis Stage?

Published 09/07/2016, 06:09 AM
Updated 03/09/2019, 08:30 AM

Mired into recession for two years, the Brazilian economy posted the sixth consecutive quarterly decline in GDP in Q2 2016 (-0.6% q/q sa). As for real economy and public finances, lights are still red or, at best, orange. Nonetheless, the markets have definitely turned green since early 2016. Year-to-date, the real appreciated 18% vs. the US dollar, the IBOVESPA stock index increased by 37%, and yields on government domestic bonds and CDS spreads on sovereign Eurobonds shrank by 480 and 240 basis points, respectively. This dichotomy reflects the rebound in investors’ confidence (belief?). Indeed, the markets have endorsed President Dilma Rousseff’s impeachment and have underpinned her successor, ex Vice-President Michel Temer, whose market-friendly reform agenda enjoys very little popular support.

Brazil Market Hearalding

by Sylvain BELLEFONTAINE

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