BRASILIA (Reuters) - Brazil's stocks and currency slumped to multi-month lows on Friday .BVSP, as a further escalation in trade tensions between the United States and China slammed investor confidence and asset prices around the world.
The real hit its lowest level against the dollar in almost a year, at one stage weakening beyond 4.13 per dollar, while the benchmark Bovespa stock market fell 2.34% to its lowest close since early June, preliminary data showed.
Confirming the gloomy sentiment towards Brazilian assets, figures on Friday showed that funds and speculators trading the U.S. futures markets undertook their biggest shift in bets against the real last week since early April.
“Emerging markets are under pressure, and China’s announcement to impose tariffs on U.S. imports doesn’t help at all,” said a senior trader at a bank in Sao Paulo, adding that the global outcry over the fires sweeping through the Amazon rainforest may also be starting to come into investors’ minds.
“The material impact is small, but the reputational image is impacted. Brazil has to better manage the situation to avoid spillover effects,” he said.
Global markets were rocked on Friday after President Donald Trump ordered U.S. companies to start looking for an alternative to China in response to Beijing’s tariffs on American goods.
With the Bovespa’s fall on Friday to 97,667 points, it has lost almost 8% since July 10, when it touched a record high of 106,650 points.
The dollar rose more than 1% above 4.13 reais for the first time since September 2018, marking its sixth consecutive weekly rise against the Brazilian currency and bringing its gains so far this month to almost 8%.
The real was one of the world’s worst-performing currencies on Friday, reviving speculation about whether the central bank might soon intervene to calm the volatility, traders said.
Meanwhile, U.S. Commodity Futures Trading Commission data on Friday showed that funds and speculators were net short the real to the tune of 8,661 contracts in the week to Aug. 20 compared to being net long 676 contracts the week before.
That marks the biggest net short position in seven weeks and the biggest week-to-week move since April. Being short an asset is to effectively bet it will fall in value, and being long is a bet it will appreciate.
Reporting by Jamie McGeever in Brasilia; Additional reporting by Jose de Castro in Sao Paulo; editing by Jonathan Oatis and Leslie Adler