EMERGING MARKETS-Petrobras sinks 21% after Bolsonaro boots CEO; Latam FX slide

US Dollar Report

Susan Mathew

    * Petrobras, Bovespa set for worst day since March
	    * Coronavirus aid extension in Brazil to be discussed this
	    * Mexican peso down for sixth straight session 
	    By Susan Mathew
	    Feb 22 (Reuters) - Brazil's benchmark Bovespa index tanked
	almost 6% on Monday as shares of oil major Petrobras plummeted
	21% following the ouster of its investor-backed chief executive.
	    After weeks of sparring between CEO Roberto Castello Branco
	and Brazilian President Jair Bolsonaro on fuel prices, former
	Defense Minister and retired army general Joaquim Silva e Luna,
	who has no oil and gas experience, was appointed to take over.
	    Petrobras has been raising fuel prices since February, which
	led analysts to downgrade its shares on concerns of possible
	political interference. Castello Branco's ouster could force a
	broader shakeup at Petrobras, which has steered toward more
	market-friendly and less politically driven policies in recent
	    Petrobras shares were on course to
	post their sharpest one-day decline since March last year, as
	was the Bovespa. 
	    "The reversal of these types of practices by Bolsonaro early
	in his administration was a key credit positive for Brazil's
	quasi-sovereigns," said Citigroup strategists. 
	    "A reversal of this policy is a clear credit negative."
	    Banco do Brasil, caught up in a spat with
	Bolsonaro over branch closings, slumped 10%, while power company
	Eletrobras skidded 7% amid signs of the president's
	interference in the power sector.
	    Brazil's real fell 2.3% to 5.51, hitting lows
	not seen since November last year, while the cost to insure
	exposure to Brazil's sovereign debt jumped 22 basis points from
	Friday's close.
	    "Local assets will underperform across the board in the very
	short-term," Citigroup warned, adding that a break in the key
	5.50 level of dollar-real pair could see further continuation of
	weakness in the real.  
	   Investors also have their eyes on a discussion regarding an
	extension of Brazil's emergency aid bill this week, with eyes on
	cost cuts elsewhere to keep spending within the limit.
	    Worries about fiscal spending have dominated investors' 
	sentiment, and saw the real lose about 22% last year, making it
	one of the worst performing emerging market currencies. This
	year, the currency is down about 6% so far.  
	    Other currencies in Latin America also
	dropped, pressured by their latest adversary - rising U.S.
	Treasury yields.
	    In its sixth straight day in the red, Mexico's peso
	slid 1.7% to hit its lowest since early November. A deep freeze
	in Texas last week affected fuel supplies and raised concerns
	about a hit to factory activity in the country, weighing on the
	    Colombia's peso slipped despite rising oil prices,
	while surging copper prices limited losses for Chile's peso
	    Key Latin American stock indexes and currencies:
	  Stock indexes           Latest   Daily %
	 MSCI Emerging Markets    1404.55    -1.78
	 MSCI LatAm               2274.27    -5.35
	 Brazil Bovespa         111714.77    -5.67
	 Mexico IPC                     -        -
	 Chile IPSA               4555.90    -1.47
	 Argentina MerVal        50620.41    -0.73
	 Colombia COLCAP                -        -
	      Currencies          Latest   Daily %
	 Brazil real               5.5110    -2.33
	 Mexico peso              20.7700    -1.66
	 Chile peso                 709.9    -0.27
	 Colombia peso               3606    -1.02
	 Peru sol                  3.6508     0.02
	 Argentina peso           89.4300    -0.30
	 (Reporting by Susan Mathew in Bengaluru; Editing by Steve