Brazilian Stocks Fall, Currency Strengthens

By Paulo Trevisani 

BRASILIA--Brazilian stocks fell but the currency strengthened Tuesday, a day marked by political and economic news that moved local markets.

The Ibovespa stock index fell 0.24%, to 51474 points. The Brazilian real exited active trading at 3.1699 per dollar, stronger than 3.1986 per dollar at closing Monday, according to Tulett Prebon via FactSet.

Stocks reacted positively in the morning to news that President Dilma Rousseff's approval rate fell to record lows.

A poll by polling firm MDA showed the Rousseff administration's approval rate at 7.7%, the lowest of any president since 1998. It also showed popular backing for a possible impeachment process against her, and indicated growing support for more conservative politicians.

The poll came out at 10:30 a.m. local time, and an hour later the Ibovespa was up 0.77%.

Investors reacted positively to the possibility that she could be weakened, in a revival of last year's trend, when Brazilian stocks rallied as Ms. Rousseff fell on polls ahead of the October elections, which she eventually won.

Ms. Rousseff's first term, started in 2011, was marked by interventions in the economy and hefty spending that are now largely blamed for Brazil's poor performance. The economy is forecast to contract by around 2% while inflation is at 9% and interest rates are 13.75% and likely to reach 14% next week.

But the Ibovespa's morning rally lost steam. "Investors realized that a political change isn't so imminent," said Ricardo Kim, analyst of brokerage firm XP Investimentos, in Sao Paulo. He said that a possible impeachment process could lead to a downgrade in Brazil's credit rating.

Government-controlled oil giant Petroleo Brasileiro SA, or Petrobras, closed down 0.19% at 10.77 reais.

Another Brazilian blue chip, miner Vale SA, closed 1.73% at 14.67 reais.

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