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Inflation Fears Bring Market Down in Brazil

Brazilian stocks fell, yesterday, alongside lackluster trading in the U.S. Brazilian equities suffered as ongoing high oil prices spurred inflationary fears.Brazil’s benchmark Bovespa Index shed 132.87 points, or 0.58%.

Brazilian issues fell, as high world oil prices ignited fears of greater inflation. Steep oil prices are expected to increase inflation, possibly leading the country, which is a net oil importer, to boost interest rates.


Some analysts foresee the government increasing local fuel prices for the third time this year following October’s municipal elections.


In a central bank survey released yesterday, economists hiked their projections for 2005 IPCA consumer price inflation to 5.89% from 5.81% the prior week.


Additionally, economists lowered their 2005 economic growth estimates to 3.5% from 3.6%, but increased their 2004 outlook to 4.56% from 4.53% following the release two weeks ago of data showing industrial production surged 13.1% in August.


Looking ahead, on Thursday, Brazil’s central bank will release the minutes from last week’s monthly monetary policy meeting, where the bank raised its benchmark Selic rate by a greater-than-expected half percentage point to 16.75%.


Investors will be paying attention to the wording of those comments in order to determine how aggressive future monetary policy will be.


In economic news, Brazil’s trade surplus reached US$ 650 million in the fourth week of October, lifting its year-to-date surplus to US$ 27.476 billion.


Brazil has already exceeded its record-breaking 2003 trade surplus of US$ 24.8 billion, with analysts attributing the incredible performance to a competitive currency, a broad industrial recovery in Brazil and a stronger global economy.


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

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