On Wednesday night, the Brazilian newspaper O Globo reported that President Michel Temer had been recorded discussing payments to silence former House Speaker Eduardo Cunha in an alleged cover-up scheme.

Two MPs have filed impeachment proceedings against the president. The Supreme Court has authorised an investigation into the allegations in early Thursday afternoon.

On Thursday Mr Temer said in a TV statement: “I never authorised any payments for someone to be silent. I did not buy anyone’s silence. I fear no accusations.”

“I have nothing to hide. I never authorised anyone to use my name”

“We cannot throw so much hard work [on reforms] done for our country in the rubbish bin.”

“I will not resign. I will not resign. I know what I have done.”

The presidential press office also denied the allegations. “President Michel Temer never requested payments to obtain the silence of ex-deputy Eduardo Cunha”, “the president defends a deep and wide investigation to get to the bottom of the claims put forward in the media.”

Until Tuesday markets were very optimistic, but now many thinks that Temer won’t keep his job if the allegations are true.

On Thursday, trading was delayed in Sao Paulo’s stock exchange. Soon after it was opened, the circuit breaker stopped all operations within just a few minutes. That has not happened since the global financial crisis of 2008.

U.S.-listed shares of major Brazilian stocks plunged:

  • State-run Petrobras dropped more than 15.4 percent.
  • Banco Bradesco fell more than 13.4 percent.
  • Vale SA recovered from a roughly 8 percent decline to close about 0.4 percent higher.
  • Itau Unibanco fell 12.1 percent.

The Brazil Bovespa index plummeted more than 10 percent, logging its worst day since Oct. 22, 2008.

However, Ross Teverson, Jupiter’s head of emerging market strategy, said that the recent shake up would likely dissipate, creating value in the long-term.

“Questionable governance has held Brazil back for a number of years and, while the ongoing corruption investigations create short-term uncertainty, there is a much greater longer-term payoff for Brazil if the new reality is that politicians and companies can no longer break the law with impunity,” Teverson told CNBC in an email.

What next for Brazilian politics?

If found innocent, Temer can be expected to remain in office until the next general election, due in October 2018.

If not, he will face impeachment and will be removed from office. In this instance, head of congress, Rodrigo Maia of the Democratic party, would take office on an interim basis of 30 days before a new president is appointed via indirect elections.

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