EMERGING MARKETS-Brazil's stocks, currency slump on news of Lula cabinet appointment
By Bruno Federowski SAO PAULO, March 15 (Reuters) - Brazil's stocks and currency fell on Tuesday on reports that former President Luiz Inacio Lula da Silva had accepted a cabinet position in President Dilma Rousseff's government, possibly reducing support among lawmakers for her ouster. Investors also feared the move could herald a return to fiscal stimulus policies that many blame for dragging Brazil into what could be its deepest recession on record. Lula, long the public face of Rousseff's Workers Party, is facing charges of money laundering as part of the biggest corruption probe in the country's history, centered on state-controlled oil company Petroleo Brasileiro SA, also known as Petrobras. A source told Reuters Lula has accepted to take the cabinet post and will meet with Rousseff later on Tuesday to discuss the appointment. This would allow Lula some protection from an investigation into money laundering charges. It also could give him time to negotiate with Rousseff's allies in Congress, who have all but jumped ship as calls for hear impeachment grow. "This is the government's last defense against an impeachment," said Francisco Carvalho, head FX trader at BGC Liquidez brokerage in São Paulo. Brazil's stocks and currency slid on Tuesday after reaching their highest since mid-2015 on Friday ahead of massive demonstrations against the President. Shares of Petrobras slumped more than 10 percent, its worst daily performance in over a year, also hit by a drop in crude prices. The stock looked set to post its biggest two-day loss since 2008. Shares of state-run lender Banco do Brasil SA tumbled 16 percent on fears that the government could use public credit to stimulate economic growth. Brazilian credit default swaps and dollar bond yields also jumped as investors demanded higher returns to compensate for increased political risk. Key Latin American stock indexes and currencies at 1540 GMT: Stock indexes daily % YTD % change change Latest MSCI Emerging Markets 788.84 -1.82 1.17 MSCI LatAm 1969.82 -4.37 12.58 Brazil Bovespa 46796.63 -4.24 7.95 Mexico IPC 44397.46 -0.66 3.30 Chile IPSA 3848.04 -0.23 4.56 Chile IGPA 18858.13 -0.17 3.89 Argentina MerVal 12110.37 -3.47 3.73 Colombia IGBC 9546.12 -0.66 11.69 Venezuela IBC 15571.01 -0.04 6.74 Currencies daily % YTD % change change Latest Brazil real 3.7527 -2.70 5.18 Mexico peso 17.9430 -1.10 -3.97 Chile peso 686.3 -0.70 3.41 Colombia peso 3180.95 -0.85 -0.37 Peru sol 3.3391 -0.21 2.24 Argentina peso (interbank) 14.5700 1.58 -10.90 Argentina peso (parallel) 15.45 1.04 -7.64 (Reporting by Bruno Federowski; Editing by Diane Craft)
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