Halister News

(Bloomberg) -- The iShares MSCI Brazil Capped ETF (EWZ) plunges 16% pre-market on reports President Michel Temer is mired in an alleged cover-up scheme, the latest development in the three-year long investigation known as Operation Carwash.

• Seeing pre-market weakness in Brazil ADRs that trade in the U.S.: Petrobras (PBR) -18%, Banco Bradesco (BBD) -16%, Vale (VALE) -13%, Embraer (ERJ) -7.1%; also note LatAm Airlines (LTM) received an unrelated downgrade by Morgan Stanley
• Also watch U.S. stocks with exposure to Brazil: MercadoLibre (MELI; Brazil accounted for ~54% of total rev. in 2016, according to Bloomberg data), Mosaic (MOS; ~30% of rev.), AES (AES; ~28% of rev.), Bunge (BG; ~16% of rev.), Monsanto (MON; ~11% of rev.)
• European blue chips with exposure to Brazil, such as Santander, Casino and AB InBev, sold off in overseas trading

RELATED

• Brazil Assets Sink as Temer Furor Adds to Trump-Fueled Selloff
• Quick Guide to Brazil Futures Markets Ahead of Expected Turmoil
• How Brazil’s New Political Crisis Might Play Out: QuickTake Q&A

To contact the reporter on this story: Arie Shapira in New York at ashapira3@bloomberg.net To contact the editors responsible for this story: Chris Nagi at chrisnagi@bloomberg.net Brad Olesen

--ROBERT FENNER

(Bloomberg) -- There is no certainty that the government will go until the end of the mandate, either because of Supreme Electoral Court (TSE), impeachment or even President Michel Temer’s resignation, which can not be ruled out, says Lucas de Aragao, a partner at Arko Advice, after news of alleged recording of Temer supporting payments to obtain the silence of ex-deputy Eduardo Cunha

• “Without doubt, it’s the most tense moment of this one year of government”
  • “Accusation represents the end of political stability, puts Temer in person and, consequently, every government in a very high risk situation”
  • “Temer will have to explain very well what happened”
• “Everything depends on confirmation of the audio”
• “For now, there is no climate to discuss reforms”
  • “With the seriousness of the accusation, today it is unthinkable to discuss the reforms”
  • “I wouldn’t say that pension reform has died, because everything will depend on the confirmation of the facts and on what will happen”
  • “I would not say that reforms have gone to the swamp, there is a sense among many opinion makers that reforms need to be made, but in this situation there is no climate for discussing reforms”
• NOTE from May 17: JBS Execs Said to Submit Temer Recording to Top Court: Globo
• NOTE from May 17: Brazil’s Temer Denies Report on Payments to Eduardo Cunha

(Bloomberg) -- Generic bund futures contract may accelerate its charge higher to potentially fill the open gap left after French election first round in April at 162.49, Bloomberg technical analyst Sejul Gokal writes.

• See chart here; RX1 +74 ticks to 161.80
• Topside risks prevails with trend-defining averages turning higher along with momentum indicators
  • 13-exponential MA now points up
  • MACD histogram flips to positive, with past turns in early February and late March anticipating trend cycle shift
• Resistance at 162.15 (April 27 high) and then 162.47-49 (April 21 low, 61.8% Fibonacci
• Treasuries, Bunds Rally After Trump-Russia Contact Reports: MORE

• NOTE: Sejul Gokal is a FICC technical strategist who writes for Bloomberg. The observations he makes are his own and are not intended as investment advice