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Why Brazilian Stocks Are Dropping 9% or More Today

By Rich Smith - Updated Apr 24, 2020 at 11:16AM

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Brazil is the new COVID-19 hot spot.

What happened

Today is shaping up to be a bad day to invest in Brazil.

Here in the U.S., the stock market looks set to end the week on a high note, with all the major indexes modestly in the green in midmorning trading. Down south of the border, however (way south, in Brazil), shares of these companes were broadly and deeply in the red, as of 10:50 a.m. EDT on Friday:

  • Oil major Petroleo Brasileiro (PBR 0.74%) (PBR.A 0.81%), commonly known as Petrobras,  down 9%.
  • Financial giant Banco Bradesco (BBD -0.13%), off 10%.
  • Electric utility Companhia Energetica de Minas Gerais (CIG -0.81%), down 12.5%.
Map of Brazil under a magnifying glass

Image source: Getty Images.

So what

Three days ago, the BBC took President Jair Bolsonaro of Brazil to task for ignoring health experts' advice about how to contain COVID-19. Bolsonaro called for a "return to normality," and characterized the global pandemic as "just a little flu or a little cold."  

Last week, Bolsonaro fired his health minister for advocating social distancing, and he fired the head of the federal police (for reasons unknown). Today, it was announced that the country's justice minister will resign in protest over the police chief's firing.  

Meanwhile, the coronavirus news just gets worse. Axios reports today that Brazil has become one of COVID-19's epicenters in Latin America. And Al Jazeera notes that the country just reported its highest daily coronavirus death toll since the start of the pandemic: 407.  

Now what

As you can imagine, explosive growth of coronavirus infections in Brazil is no better news for Brazilian stocks than the explosive growth of coronavirus infections in the U.S. was for U.S. stocks.

Although there is no news specifically affecting any of the three stocks listed above, it's perhaps instructive that the Brazilian state of Minas Gerais is one of several that are proposing to reopen their economies for business early next month, potentially unleashing a wave of new COVID-19 cases.  

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Petroleo Brasileiro S.A. - Petrobras Stock Quote
Petroleo Brasileiro S.A. - Petrobras
PBR
$13.72 (0.74%) $0.10
Petroleo Brasileiro S.A. - Petrobras Stock Quote
Petroleo Brasileiro S.A. - Petrobras
PBR.A
$12.48 (0.81%) $0.10
Companhia Energética de Minas Gerais Stock Quote
Companhia Energética de Minas Gerais
CIG
$2.46 (-0.81%) $0.02
Banco Bradesco S.A. Stock Quote
Banco Bradesco S.A.
BBD
$3.79 (-0.13%) $0.01

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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