Brazilian assets rally as Lula detained in corruption probe

|By:, SA News Editor

News that Brazil’s federal police detained former Pres. Lula da Silva for questioning in connection with the Petrobras (NYSE:PBR) corruption scandal sparked a rally in Brazilian assets today, as investors hoped the deepening political crisis would result in Pres. Rousseff's ouster and a more market-friendly government.

Brazil's real rose more than 3% vs. the U.S. dollar before settling to a 1% gain, and the Bovespa stock index jumped 4%.

Federal prosecutors who ordered today's raids said there was evidence that Lula personally received funds from the graft scheme through work on a luxury beachside penthouse and a country home; beyond the allegations of personal perks and payoffs, prosecutors today described the former president as leading a years-long scheme to divert money from Petrobras to fund election campaigns that would keep his Workers’ Party and its allies perpetually in power.

A presidential aide called the accusations against Lula a "turning point" in the  crisis, warning that if authorities do not quickly present concrete proof against Lula, "there is going to be violence in the streets. It could be a real war."

In today's U.S. trading of Brazil-based stocks: PBR +11.4%, PBR.A +12.9%, VALE +7.1%, EBR +4%, ELP +6.7%, CPL +3%, CIG +0.5%, BSBR +1.7%, BBD +11.6%, ITUB +7.4%.

ETFs: EWZ, BRF, BRZU, EWZS, BRAQ, BZQ, BRAZ, BRAF, UBR, DBBR, FBZ

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