Thursday saw a massive sell-off of shares in Brazil prompted by fears that President Michel Temer could be ousted.
At one stage São Paulo’s main stock market index fell 10.7 percent triggering an automatic halt to trading. The market was closed for half an hour.
Investors were panicked by allegations of witness tampering involving the president.
If Temer goes that could derail economic reforms he has been pushing through.
Consequently the shares of banks and state-controlled oil company Petrobras slumped.
Brazil’s currency the real lost over seven percent of its value against the US dollar, wiping out all its gains so far this year and government bomb prices were hit.
The report threatened to torpedo a two-year rally in Brazilian assets as traders quickly reassessed the chances of success of efforts to streamline the country’s social security system and reform labor regulations. As a result, policymakers attempts to curtail the growth of public debt and foster economic growth may also now be in doubt.
“For the market, it’s not a question of whether Temer will be ousted or not. The question is whether it will be quick and for how long reforms will be delayed,” trader Thiago Castellan at Renascença brokerage said.