By Jamie McGeever and Paula Laier
BRASILIA/SAO PAULO (Reuters) - Brazilian stocks plunged more than 12% on Monday to record their biggest fall since 1998 and the central bank intervened twice in the currency market as the real slumped to another record low, in a day of widespread fear and selling across global markets.
The benchmark Bovespa index's 12.3% decline (BVSP) was its biggest one-day fall since October 1998 and the seventh largest ever, with preferred shares in oil giant Petrobras recording their steepest ever decline of 30% (SA:PETR4).
The savage sell-off came after Saudi Arabia decided to ramp up oil production as OPEC's supply-cut agreement with Russia collapsed, sending ripples across global financial markets already panicking about the impact of the coronavirus outbreak.
"Not a good day to be in Brazil," said Jason Vieira, chief economist at Infinity Asset Management in Sao Paulo. "Brazil is taking the hit more than anyone else, again. The local market suffers for the massive presence of Petrobras in the Bovespa."
"The real has probably found its floor, but it does not mean that markets won't test the central bank again. They will," he added.
(GRAPHIC: Brazil stocks - daily change - https://fingfx.thomsonreuters.com/gfx/mkt/13/3095/3060/BOVESPA.png)
In the currency market, the central bank followed up a $3 billion spot market auction in the morning with a $465 million sale in the afternoon, as the real slumped to a new record low just shy of 4.80 per dollar (BRBY).
That marked the central bank's first intervention in the spot market since November last year, and its largest sale of dollar reserves since 2009. It arrested the real's decline, but the currency still lost around 2% of its value on Monday and has now depreciated by more than 15% this year.
Monetary policy director Bruno Serra said on Monday that the central bank will do whatever is needed and in whatever size is needed to ensure the smooth functioning of the foreign exchange market, adding that Brazil's $330 billion of net reserves provides a "robust insurance" against external shocks.
"The new FX approach is the right one, as we're in panic mode," said a senior trader at a big bank in Sao Paulo. "It's time to provide as much liquidity as possible to contain the pressure."
The $3.465 billion spot market intervention followed interventions in the FX swaps market in recent weeks worth almost $10 billion. The action prevented the real from falling below 4.80 per dollar and helped ease market volatility, if only slightly.
(GRAPHIC: Brazil real volatility - https://fingfx.thomsonreuters.com/gfx/mkt/13/3087/3052/BRLVOL.png)
In stocks, trading on the B3 Bolsa Brasil Balcao (SA:B3SA3) was halted minutes after the open by an automatic "circuit breaker" triggered by the Bovespa's 10% fall. The exchange resumed trading and extended its decline.
The steep fall, led by energy firms, miners and banks, pushed the Bovespa deep into bear market territory, signaling a decline of 20% or more from its peak.
The index is now down 28% from its all-time high of 119,593 points on Jan. 24. In dollar terms, according to Reuters calculations, the Bovespa is now down 35.5% year to date, the steepest drop of any major equities index in the world.
Common and preferred shares in state-controlled oil company Petroleo Brasileiro SA (SA:PETR4) sank 30%, the largest ever intraday fall. Petrobras' market value lost 95 billion reais ($20 billion) compared with Friday's close.