Brazilian equities continued downward deepening its already-steep declines this week. Investors in Brazil will be closely watching today’s release of the U.S. employment report for December, which may shed some light on the degree of potentially aggressive U.S. monetary policy tightening.
Brazil’s benchmark Bovespa Index dropped 324.87 points, or 1.32%. Brazilian shares deepened their losses, amid ongoing profit taking and forecasts that U.S. interest rates might increase faster that previously anticipated.
Brazilian analysts interpreted the minutes from the U.S. Federal Reserve’s December meeting as a precursor to further interest rate hikes, which could draw foreign investment away from Brazil.
In earnings news, electric power utility Cemig reported a preliminary 2004 net profit that rose to 1.49 billion reais from 1.19 billion reais in 2003. The stock nevertheless tumbled.
Turning to research notes, two major investment houses raised their price targets on low-cost Brazilian airline Gol. The first upped its 12-month price target by around 20% from current levels to US$35, noting the carrier “still has some of the best growth prospects of any airline in our coverage universe.”
The other raises its target to US$36. Both investment houses rate Gol at “overweight/buy.”
Also, an influential brokerage initiated coverage on Brazil’s No. 2 steelmaker Belgo-Mineira at “peer perform,” due to the firm’s “robust fundamentals” and high margins.
The analyst said in its research note that a possible merger between Belgo and three other Brazilian subsidiaries of global steel giant Arcelor is also presenting a revaluation opportunity on the stock.
Thomson Financial Corporate Group
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