EMERGING MARKETS-Brazil currency, stocks down for 3rd day on cabinet reshuffle fears
By Bruno Federowski SAO PAULO, March 16 (Reuters) - Brazil's currency and stocks extended their slide into a third day on Wednesday on fears that a Cabinet reshuffle could indicate a shift toward looser fiscal and monetary policy in the crisis-ridden economy. Those concerns were stoked by news that former President Luiz Inacio Lula da Silva will take over as chief of staff for his successor and protégé Dilma Rousseff. The move offers him some protection from a sweeping corruption investigation and gives him time to negotiate with lawmakers who will vote on Rousseff's impeachment. A source told Reuters that central bank chief Alexandre Tombini may step down if Lula's return brings major economic policy changes. Local media reported this week that the government is considering a series of policy changes, including lowering interest rates, boosting the supply of credit and using foreign reserves to reduce debt. Both Lula and Rousseff adopted similar measures over the last decade, something many traders blame for pushing the once-booming economy into its deepest recession on record. Rousseff had promised to implement some austerity measures in her second term in government, but has largely failed to do so in the face of opposition from the ruling Workers Party. "Markets should continue to react unfavorably to the possibility of a policy swing," Guide Investimentos analysts wrote in a client note. Yields paid on short-term interest rates future contracts <0#2DIJ:> fell as investors bet that a cut in benchmark rates could come sooner rather than later, despite stubbornly high inflation. Shares of state-controlled lender Banco do Brasil SA were slightly higher a day after falling more than 20 percent. Political uncertainty kept trade volatile, and Credit Suisse affirmed its "underperform" recommendation for the stock. Shares of Petroleo Brasileiro SA rose 3.6 percent on the back of higher oil prices. Petrobras, as the state-run oil company is known, is the center of a draft probe that has reached key politicians and public figures. Key Latin American stock indexes and currencies at 1600 GMT: Stock indexes daily % YTD % change change Latest MSCI Emerging Markets 789.29 -0.18 -0.44 MSCI LatAm 1952.49 -1.41 8.24 Brazil Bovespa 46840.82 -0.61 8.05 Mexico IPC 44311.10 0.23 3.10 Chile IPSA 3838.18 -0.34 4.29 Chile IGPA 18815.40 -0.3 3.66 Argentina MerVal 12273.49 1.63 5.12 Colombia IGBC 9405.62 -0.92 10.04 Venezuela IBC 14831.16 -3.02 1.67 Currencies daily % YTD % change change Latest Brazil real 3.8058 -1.20 3.71 Mexico peso 17.9460 -0.33 -3.99 Chile peso 687.2 0.00 3.27 Colombia peso 3156.61 0.20 0.40 Peru sol 3.38 -0.77 1.01 Argentina peso (interbank) 14.4750 0.41 -10.31 Argentina peso (parallel) 15.22 0.85 -6.24 (Additional reporting by Paula Arend Laier; Editing by David Gregorio)
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