For the sixth day in a row the Brazilian markets continued their downhill trip. The Bovespa, Brazil's stock exchange, had a little bull phase this Thursday morning, October 9, gaining up to 4.5%, but this was before the Dow Jones slump, which ended up dropping 7.3%.
Following the US market debacle, Brazilian stocks went also south closing the day at 37.080 points, 3.92% down. The Ibovespa, the reference for the Brazilian stock market, now has fallen over 25% in the last six days and 41.96% this year.
Thanks to a series of interventions by Brazil's Central Bank, the US dollar, which had been feverishly zooming up in recent days lost some ground closing at 2.187 reais, 4.07 less than the previous day.Â
In order to contain the dollar hike the Central Bank held an auction to sell the greenback at 10:35 am. At 12:45 pm the BC went ahead with the swap auction that had been scheduled the previous day.
The Bovespa traded 5.5 billion reais (US$ 2.5 billion) during the Thursday session. The biggest losers were companies linked to the construction sector such as Cyrela and Gafisa, while the Brazilian market's blue chips, mining company Vale and oil multinational Petrobras, lost 3.87% and 3.07% respectively.
On Wednesday, Latin American stocks and currencies fell during another day of volatile trading on fears of a global slowdown. Several central banks had to intervene to cool the demand for US dollars.
Brazil's stock market Ibovespa plunged 5.1% when trading opened, reversed and went into positive territory but then fell again. It was down 1.9% to 39,380. The real meantime lost as much as 10% against the US dollar before climbing back after the central bank sold 1.3 billion in three dollar auctions. It finally stabilized at 2.25 having reached earlier 2.50 to the greenback.
In Mexico, the stock exchange was up nearly two-thirds of a percent but the IPC index finally ended 0.99% down at 20.687. However the peso fell as low as 14 pesos but finally stabilized at 12.25 to the US dollars following the announced that the Central Bank would auction 2.5 billion US dollars in reserves to prop up the struggling currency.
The first day absorbed almost a billion US dollars, and the rest will be auctioned Thursday, but officials said that 400 million US dollars will be available on a daily basis.
Chile's IPSA fell 4,54% to 2.238,66 points and IGPA index lost 3,88% to 10.964,60. In the last five trading days IPSA has lost 21% totaling 26.6% in 2008.
Argentina's Merval index ended 1.82% down, with a loss of 15.35% in five trading days. The Merval stood at the end of the day at 1.359,27, the lowest since April 2005. The Argentine peso lost a couple of cents to the US dollar with modest intervention from the central bank.
Analysts say the market volatility could devastate Latin America's commodities-based economies. Chile's Codelco is the world's largest copper producer. Peru is the world's largest silver producer and a major supplier of copper, zinc and gold.
Brazil, with the region's largest economy, has been hit hardest because its equities were pumped up the most in recent years by foreign investment. Now foreign investors are dumping emerging market positions to reduce their risks.