Brazilian Stocks Gain as Bolsonaro Pushes Reforms


Most attention yesterday focused on drama in Washington, but important things were also happening in Brazil.

President Jair Bolsonaro released details of a pension reform intended to narrow the country’s gaping budget deficit. It will go to lawmakers next Wednesday, February 20.

The iShares Brazil ETF (EWZ) was down 1.4 percent before the news hit, then rallied to end the session up 2.7 percent. That produced a “bullish engulfing candle,” with a lower low and higher high than the previous session. Chart watchers may consider that a sign of buyers taking control.

Investors embraced the pension plan as evidence the new president is starting to implement his pro-business agenda. Sentiment’s improved sharply in Latin America’s biggest economy since Bolsonaro’s upset victory in late 2018 ended nearly two decades of leftist control.

iShares Brazil ETF (EWZ), with engulfing candle and “golden cross.”

Interestingly, Brazil is surging as the U.S. slows. Our jobless claims yesterday were higher than expected for the third straight week and retail sales had their worst drop since 2009. Economists and central bankers are even starting to use the “R” word (recession).

Take a step back to view the whole picture. China’s struggling because of its trade war with President Trump. Europe’s staggering toward a Brexit abyss and the U.S. is potentially weakening.

Against that backdrop, an investor-friendly Brazil could suddenly be one of the world’s more appealing countries. Was that the message from yesterday’s bullish engulfing candle?

Bolsonaro’s only been in office since January 1, although Market Insights spotted his impact on Brazilian markets in early October. Make sure to keep checking back for more in the coming weeks.

Here are some other actively traded symbols associated with Brazil:

  • Vale (VALE): Mining giant, the biggest iron-ore producer in the world.
  • Petrobras (PBR): Major oil company.
  • Itau Unibanco (ITUB) and Banco Bradesco (BBD): Major banks. ITUB is Latin America’s biggest financial company.
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David Russell is Global Head of Market Strategy at TradeStation. Drawing on nearly two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.