Brazilian equities declined on interest rate hike fears. In the U.S., the producer price index rose 1.7% in October, the biggest increase since January 1990 and well above expectations for a gain of 0.6%.
Also, Brazil’s central bank is expected to hike interest rates at its meeting tomorrow, November 17. Brazil’s benchmark Bovespa Index fell 263.36 points, or 1.10%.
Brazilian issues slid, as Brazil’s central bank is projected to hike its benchmark Selic interest rate for the third time in three months on Wednesday at the conclusion to its monthly monetary policy meeting.
The central bank is seen boosting interest rates by up to 50 basis points in an effort to curtail increasing local inflation expectations for this year and next.
Turning to research notes, a major Wall Street investment bank raised its rating on Brazilian equities to “overweight” from “marketweight,” due to a more manageable external financing gap in 2005 than the country encountered in 2004.
The analyst explained that Brazil’s growing commercial relations with China will help cover that gap.
In earnings news, Brazilian aircraft manufacturer Embraer announced yesterday that its third-quarter net profit more than quadrupled to 396.9 million reais, up from 88.9 million reais last year, as it delivered twice as many planes.
However, Embraer said today that it was unlikely to deliver additional planes to US Airways this year and may even have to take back seven jets if the carrier goes out of business.
Also, steel company Usiminas said its net earnings totaled 1.0 billion reais in the third quarter, versus 123 million reais one year before.
The firm lauded lower financing expenses and robust demand and rising prices for steel for the profit that came in near the high end of forecasts.
Also, Usiminas’ quarterly net revenue climbed to 3.29 billion reais from 1.98 billion reais.
Iron ore exporter CVRD was active, after the period for “exclusive” talks between Canadian miner Noranda and China Minmetal concluded.
Traders highlighted investor concern that CVRD may attempt to take advantage of that opening to renew discussions with Noranda, whose possible acquisition CVRD shareholders are opposed to.
Thomson Financial Corporate Group