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By Jamie McGeever
BRASILIA, March 26 (Reuters) - Brazilian markets rallied on Thursday after a $2 trillion U.S. stimulus package boosted investor sentiment around the world, putting stocks on course for their biggest weekly gain in four years and the currency on track for its best week this year.
Measures of market volatility fell and lending spreads narrowed, indicating that the severe stress on Brazilian markets stemming from coronavirus pandemic fears in recent weeks were starting to ease.
The benchmark Bovespa stock market closed up 3.66% at 77,700 points and the real closed at 4.9957 per dollar , while implied FX volatility fell to its lowest in two weeks and some long-dated interest rate futures fell below 8%.
“Good news, the stock market is rising for the third day in a row,” said one senior trader in Sao Paulo, noting that firms with good cash buffers will survive the crisis and will offer good value to credit and equity investors.
The Bovespa’s rise took its gains so far this week to over 15%, which would be the biggest weekly increase since April, 2016, and the real is now up more than 1%, eyeing its biggest weekly gain this year.
Analysts at Citi said on Thursday that emerging market credit markets may have reached a bottom, and while volatility will remain high, “we could see some normalization following policy responses to curb the virus in G10 countries.”
Earlier on Thursday Brazil’s central bank lowered its 2020 economic growth outlook to zero from 2.2% due to the coronavirus impact.
Central bank President Roberto Campos Neto said the main channel of support for the financial system remains ensuring banks have ample liquidity, adding that he was completely relaxed about the strength and stability of the banking system.
Reporting by Jamie McGeever; Editing by Sandra Maler