The falling prices of oil, which hurt state-controlled oil multinational Petrobras, the most important company listed in the Brazilian stock exchange, were a main contributor together with the international bad mood to another slump, this Friday, October 24, in the Brazilian market.
Brazilian shares dropped 6.91% to 31,481 points. According to consultancy company Economática, the accumulated results for 2008 are the worst in the history of the Brazilian stock market.
In October alone the market has fallen 36.5%, the fourth worst result for Bovespa, the Brazilian stock exchange. When the whole year up to October 24 is considered, the drop is a staggering 50.7%. Brazil never had it so bad. In terms of points the Ibovespa, Bovespa's main index, hasn't been that low since November 2005.
On Friday, among the main companies listed by Bovespa, Petrobras fell 10.13% to 20.40 reais,Â mining company Vale lost 5.36% to 22.05 reais, Bradesco bank dropped 7.36% to 20.01 reais.
Four interventions by the Brazilian Central Bank (BC) were not enough to avoid the appreciation of the dollar. Once again, the greenback had a tortuous day throughout the trading session closing at 2.327 to the dollar, a 0.95% increase from the previous day.
The dollar went up 10% this past week, accumulating a 22% increase in the month of October. For the year the gain for the American currency has been over 30%. At the end of 2007, one dollar was worth 1.77 reais.
Brazil's central bank said Wednesday it would pump the equivalent of US$ 50 billion into currency markets to stem a two-month tumble in the real that is threatening companies and stoked inflation.
Authorities said the injection will be in the form of contracts that will allow investors to protect against further declines in the Brazilian currency. Brazilian Finance Ministry, Guido Mantega, announced that it had scrapped a key tax that foreigners pay on financial market transactions.
Brazilian prices as measured by the IGP-10 index of wholesale, consumer and construction costs rose 0.78% in the month ended to October 10 after declining 0.42% the previous month.
Brazil's Bovespa had rebounded Thursday from early losses trading up 0.38% to 35,203.38. On Wednesday the index had plunged more than 10% and trading was suspended automatically when it fell more than 10%.
Earlier in the week Brazil allowed its two largest state-run banks to buy stakes in financial firms, some of which it says could be facing difficulties from the drying up of credit in domestic markets. The government also increased credit lines to farm and construction industries.
The Finance Ministry said it had eliminated a tax known as the IOF which was 1.5% on currency exchange for inflows of foreign capital and 0.38%on foreign currency loans.
Later, the Central bank held two auctions of dollar swap contracts worth a total of 2.27 billion USD. It said it was ready to expand its sales of such contracts to 50 billion USD, prompting the Real rebound.