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Brazil stocks jump 7% in biggest gain since 2009, FX intervention boosts real

Published 03/10/2020, 04:49 PM
Updated 03/10/2020, 04:51 PM
© Reuters.  Brazil stocks jump 7% in biggest gain since 2009, FX intervention boosts real
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By Jamie McGeever

BRASILIA (Reuters) - Brazilian stocks chalked up their biggest one-day rise in 11 years on Tuesday, on growing hopes for global economic stimulus measures and as investors bought stocks battered down the previous day in the biggest selloff since 1998.

Shares in oil giant Petrobras and miner Vale led the rebound, rising 8.7% and 18.1%, respectively, while the central bank's third intervention in the spot foreign exchange market in two days helped drive the real's biggest rally this year.

A day after the real had slumped to a record low against the dollar, the central bank sold $2 billion on the spot market in the morning, bringing its FX intervention this week to $5.465 billion.

Local markets got a lift from the global relief rally, which saw Wall Street soar more than 4.5% as bargain hunting and hopes of government stimulus calmed investors' fears surrounding the coronavirus and growing signs of imminent recession.

"For those with a long-term investment horizon who weren't already invested (in stocks), this is an excellent time to buy shares," Rico Investimentos, a brokerage in Sao Paulo, said in a client note on Tuesday.

"For those already invested and with cash to take advantage of opportunities, the is also a very opportune time (to buy)," they added.

Preferred shares in state-controlled oil company Petroleo Brasileiro SA, known as Petrobras (SA:PETR4), surged as much as 16% before easing back to close up 8.7%, and miner Vale SA's (SA:VALE3) 18% rally was its biggest rise since January, 1999.

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On Monday, Petrobras shares sank 30%, their biggest ever one-day loss, which wiped almost 100 billion reais off its market value.

Brazil's real rose 1.7% to close at 4.6457 per dollar (BRBY), a day after slumping to an all-time low close to 4.80 per dollar. Some analysts said selling pressure on the real is likely to return soon, which will force the central bank to take even bolder action.

"Until now, the central bank has maintained discretion regarding these interventions, announcing them on a daily basis at the expense of a medium-term intervention plan," Citi strategists wrote in a client note on Tuesday.

"With the escalation of the Covid-19 outbreak worldwide, the likelihood of the central bank announcing a FX intervention plan is increasing," they said.

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