Brazilian Traders Have The Day To Think About What Their Country's Humiliating World Cup Loss Means For The Economy

It’s not because of the World Cup loss, but Brazil’s Bovespa stock exchange in Sao Paolo is closed today.

Today is a national holiday in Brazil, recognising the Constitutionalist Revolution of 1932, an uprising of the citizens of Sao Paolo against the government of Getulio Vargas, which took the Brazilian presidency in a 1930 coup d’etat.

The iShares MSCI Brazil Index ETF was, however, trading in New York. As of 11:20 am EST, the ETF was up 1.7%.

But in soccer-crazed Brazil, the country’s 7-1 defeat to Germany in the World Cup semifinals is likely to result in something more resembling a day of mourning.

For the host nation, which was an overwhelming favourite coming into the tournament before losing its best player in a quarterfinal match against Colombia, it was its worst loss ever.

And this morning, the front pages of Brazilian newspapers today are absolutely brutal.

The Financial Times notes that before the World Cup, UBS said a poor performance from Brazil in the World Cup could be good for Brazilian stocks, as it would increase the chances president Dilma Rouseff could be unseated by Aecio Neves, who represents a more pro-business party.

At Bloomberg View, Mohamed El-Erian writes, “[Brazilians’] disappointment is likely to be visible quite soon in President Dilma Rousseff’s popularity ratings. With campaigning for the presidential elections set to start shortly, Brazil’s football disaster could well play a role in frustrating Rousseff’s re-election bid.”

El-Erian adds that the financial market response to Brazil’s defeat, “remains an open question,” writing that the country could fall into a “football-induced slump” or do just the opposite.

In the coming months, we’ll find out if Brazil’s inglorious exit from the World Cup really impacts the country’s presidential race and economy.

But today, Brazil pauses.

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