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Black Wednesday Knocks Brazil Markets Down 5%

Brazil's stock exchange Bovespa It was Brazil stock market's second worst day this year. Battered by a widespread slump in the global prices of commodities, Bovespa, the São Paulo stock exchange, this Wednesday,  March 19, plummeted 5.01%, closing at 58,827 points with 6.8 billion reais (US$ 3.97) traded.

Oil, for example, fell almost 6% in New York, closing at US$ 104.48 a barrel, a 4.72% decline. And among the most beat up companies in Brazil were giants Petrobras, the state-controlled oil multinational and the mining firm Vale.

Petrobrás's and Vale's preferential shares had steeper reductions than the Bovespa itself. While Petrobras declined 7.4%, Vale shrank 7.2% during the Wednesday session.

Ibovespa, the Bovespa's main index, mirrored the European and American markets in a day in which uncertainty continued to dominate the financial world.

While the stocks tumbled the American dollar went up 1.77% to 1.721 reais, erasing the gain from the previous day. On Tuesday, announcement by the Fed of a 0.75% cut in interest rates had caused the dollar to fall 1.9% in relation to the Brazilian currency.

Analysts explained that the market was particularly shaken in Brazil, much more than in the United States or Europe, due to the fact that commodities have a great weight in the Brazilian economic performance. Brazilian companies that export raw material are heavily represented in the São Paulo stock market.

"Our fall was basically caused by commodities," explained Jayme Soares Alves Neto, an investment analyst with brokerage house Spinelli. "Petrobrás, Vale and the steel plants, which are exporters of these products, are the main companies negotiated in the stock market."

Alves Neto believes that the US subprime crisis will continue to make victims worldwide. "The Fed," he says,  "should help in a way that there is no systemic crisis in the financial system. It cannot help every one though. That would give a sense of impunity to those who bet too high."

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