Tight Money Depresses Brazil Stocks

Brazilian stocks ended mixed to higher, ahead of an interest rate decision later yesterday. Brazil’s market edged south in the run up to an expected monetary tightening.

Brazil’s benchmark Bovespa Index dipped 19.50 points, or 0.09%. Brazilian issues continued lower, as investors remained cautious ahead of an expected interest rate hike by the central bank on worries inflation could be spurred higher by economic growth and record world oil prices.


Brazil’s central bank was projected to boost its benchmark Selic rate by a quarter percentage point to 16.50% at the conclusion of its monthly two-day monetary policy meeting, although some economists were foreseeing a more aggressive half point rate hike to 16.75%.


News at the end of the day was that Brazil’s central bank had raised its benchmark lending rate for the second time in two months, to 16.75%. Monetary authorities explained they were trying to slow the economy in order to avoid inflation.


On the corporate front, Embraer lowered its delivery forecast to 145 airplanes for this year and next, from an earlier outlook for 160 jets in 2004 and 170 in 2005.


The world’s No. 4 producer of commercial aircraft attributed the revision to US Airways Group’s September bankruptcy filing and U.S. regional carrier American Eagle’s provisional cancellation of the delivery of 18 ERJ-145 model planes.


Turning to research notes, a major Wall Street investment bank downgraded Brazilian pulp company Aracruz Celulose SA, Latin America’s largest pulp exporter, to “peer perform” from “outperform” based on what the analyst sees as a price outlook that is not as favorable as previously thought.


The bank explained that forestry product firms have over produced, thinking that price increases were in store during the final months of the year as key producers such as China would replenish their stocks.


Thomson Financial Corporate Group
http://www.thomsonfinancial.com/

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