Brazilian market strengthened this Friday, January 14, amid a batch of economic news, with gains on Wall Street driving enthusiasm for emerging market investments.
The U.S. market was lifted by as a drop in wholesale prices, which dampened concerns about inflation and more aggressive interest rate hikes by the U.S. Federal Reserve.
Brazil’s benchmark Bovespa Index rose 118.39 points, or 0.48%. Brazilian equities advanced, as bullish foreign investors entered the market.
Local inflation data was in focus. The country’s Broad Consumer Price Index, the IPCA, advanced 7.60% in 2004, the slowest pace in three years and within government-set inflation targets for the first time since 2000.
However, the IPCA rose 0.86% in December from 0.69% in November, suggesting Brazil’s Central Bank will likely hike interest rates at its monthly meeting scheduled for next week.
Most economists already expect the bank, which uses the IPCA to guide monetary policy, to boost the benchmark Selic interest rate by about half a percentage point to an annual 18.25%.
Traders commented that investors worry higher rates could restrict economic growth and weigh on corporate results.
Mining and steel shares again experienced robust buying activity. Companhia Vale do Rio Doce climbed, as investors foresee the company announcing a significant increase in iron ore prices any day now.
Additionally, AmBev stated that fourth-quarter Brazilian beer sales accelerated by an impressive 14% to 18.42 million hectoliters on the year. Brazil is the world’s No. 4 beer market.
Amid research notes, an influential brokerage initiated coverage on Brazilian electricity utility CPFL Energia at a “peer perform” rating and a price target of US$ 25 per American Depositary Receipt.
The analyst said CPFL’s stock appears fully valued and that it considers an upside of 20% of its target price “moderate” for Brazil.
Thomson Financial Corporate Group