After leading global equity markets for the first two months of the year, the Brazilian Bovespa has fallen like a BRIC since hitting its 68,970 high on March 14th. We noted the index broke its 200-day yesterday and with today’s close is negative for the year, down more than 18 percent from the March high. Surprising given the currency has weakened significantly, which is big red flag in our book.
No doubt there are many reasons for the slide, but it feels to us, it is more tied to the China slowdown and collapse in the commodity complex. Though most equity markets are moving with commodities, note the close movement of the Bovespa with the CRB Index in the chart below. Listen to the markets and stay tuned.
This is not only a reflection of a commodity-led export sector but also the risk-on/risk-off nature of global markets incredibly pregnant with central bank created liquidity.
(click here if charts are not observable)