May 24, 2018 / 3:27 PM / 3 months ago

EMERGING MARKETS-Brazil stocks down for a 2nd day as Petrobras plummets

    By Bruno Federowski
    BRASILIA, May 24 (Reuters) - Brazilian stocks dropped for a
second day on Thursday, as shares of Petróleo Brasileiro SA
 plummeted after the state-controlled oil company
announced a temporary diesel price cut.
    Brazilian truckers kept protesting high diesel prices for a
fourth day on Thursday, crippling highways nationwide even after
the company acted.
    Brazil's lower house of Congress voted on Wednesday to
eliminate certain taxes on diesel. The Senate has yet to vote on
the tax cuts, which truckers say are needed before they will end
protests.
    Petrobras, as the oil company is known, on Wednesday
announced a temporary 10 percent diesel price cut at refineries,
insisting its independence from political interference was
intact.
    But the action, together with recent delays in plans to
privatize state utility Centrais Eletricas Brasileiras
, raised new investor worries about the possibility of
more interventionist state posture in an election year.
    "For people who already had doubts about how the government
would react in a moment of instability, what happened with
Petrobras and also Eletrobras in the last few days was a
worrying sign," said Fabio Carvalho, head of fixed income
trading at CM Capital Markets.
    Petrobras shares tumbled 13.5 percent to a
one-month low, their biggest daily drop since May 2017. They
were by far the largest decliner on the benchmark Bovespa stock
index, which was down 2 percent, and accounted for more
than 1,000 points of the Bovespa's 1,605-point drop.
    For years, Petrobras kept local prices lower than global
prices, effectively offering subsidies that helped its debt
balloon. It had since followed a policy of tracking global
prices closely.
    In a report, analysts at UBS said keeping local fuel prices
artificially low could reduce Petrobras' operating profit, curb
buyer interest in its assets and bump up funding costs.
    Most other Latin American financial markets also fell,
extending a recent slump fueled by concerns over global trade
frictions and potential contagion from a sell-off of the Turkish
lira.
    The Brazilian real and the Mexican peso both
weakened, with the Mexican currency surrendering gains from the
previous day that came in the wake of reports of movement on the
renegotiation of NAFTA with Canada and the United States.    
    
    Key Latin American stock indexes and currencies at 1410 GMT:
 Stock indexes                               daily %     YTD %
                                              change    change
                                  Latest              
 MSCI Emerging Markets              1135.45     0.21     -2.19
 MSCI LatAm                         2684.16    -0.78     -4.34
 Brazil Bovespa                    79710.26    -1.43      4.33
 Mexico IPC                        45596.98    -0.39     -7.61
 Chile IPSA                         5593.22    -0.35      0.51
 Chile IGPA                        28263.67    -0.48      1.01
 Colombia IGBC                     12047.81    -0.06      5.96
                                                              
 Currencies                                  daily %     YTD %
                                              change    change
                                     Latest           
 Brazil real                         3.6435    -0.54     -9.06
 Mexico peso                        19.6880    -0.30      0.06
                                                      
 Chile peso                          622.65    -0.06     -1.28
 Colombia peso                       2866.5     0.24      4.03
 Peru sol                             3.266    -0.06     -0.89
 Argentina peso (interbank)         24.5000    -0.04    -24.08
                                                      
 Argentina peso (parallel)            25.35     0.20    -24.14
                                                      
 
 (Additional reporting by Paula Arend Laier)
  
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