Brazilian financial markets went into a tailspin on Monday, as investors dumped the country’s currency and stocks, while pushing up interest rates, after President Jair Bolsonaro moved late on Friday to sack the head of state-run oil firm Petrobras following weeks of clashes over fuel price hikes. The right-wing populist’s intervention in one of Brazil’s most valuable companies, along with a vow to reduce prices in the power sector too, cast growing concern on the government’s commitment to free markets. Several brokerages downgraded Petroleo Brasileiro SA, as Petrobras is formally known, and Bank of America cut Brazilian stocks to ‘marketweight’ in its Latin American portfolio, excluding Petrobras and state power company Eletrobras entirely. “Today is a pretty ugly day,” said a hedge fund trader in Sao Paulo. “The big concern now is if Bolsonaro’s decisions are going to be limited to public companies, or if he is going to spend more without reforms.” Petrobras preferred shares and common shares both plunged around 20% on Monday, wiping more than 60 billion reais ($11 billion) off the company’s value. Its market capitalization fell some 28 billion reais on Friday. The Bovespa index fell over 5% in early trading before paring losses, with preferred shares in Centrais Eletricas Brasileiras, as Eletrobras is formally known, down almost 8% at one point. The real fell as much as 2.5% to a 3-1/2-month low of 5.53 per dollar, bringing its losses against the dollar so far this year to 6% before recovering slightly. The real is one of the worst-performing currencies against the dollar so far this year, according to Refinitiv data on 152 currencies. Interest rate futures also surged on Monday. The January 2022 contract jumped almost 20 basis points to 3.61%, a level not seen since May last year. Brazil’s credit default swaps (CDS), effectively the cost of insuring against sovereign default, jumped 22 basis points to 185 bps, the highest in over three months. Morgan Stanley removed its ‘like’ recommendation on Brazil sovereign bonds, citing fiscal concerns and potential spillovers from Bolsonaro’s action. Bolsonaro defended his decision to replace Petrobras Chief Executive Roberto Castello Branco with a retired army general with no oil and gas experience, insisting on Monday that recent fuel price hikes were hurting the Brazilian people. “It is my right to renew (his tenure) or not. It will not be renewed. What’s the problem? Some people in financial markets are very happy with a policy that only ... serves the interests of certain groups in Brazil,” he told supporters outside the presidential palace. Over the weekend, Bolsonaro cast rising energy prices as an attack on him and vowed to reverse the trend. He said on Monday there was room to cut fuel prices 10% by reducing taxes and profits for fuel distributors. A survey of institutional investors by online brokerage XP Investimentos released over the weekend showed that 57% of investors now think the government’s formal spending cap will be broken this year, up from 32% last month. A growing number of investors also think Economy Minister Paulo Guedes, a committed free-marketeer, will not last in his post beyond June.