EMERGING MARKETS-Brazil currency, stocks down for 3rd day on cabinet reshuffle fears

miércoles 16 de marzo de 2016 12:23 GYT

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
    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
 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
 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