Brazilian shares headed south, as profit taking commenced ahead of the year-end holidays. Trading could be light later in the week, with Christmas falling this Saturday. Brazil’s benchmark Bovespa Index fell 122.51 points, or 0.48%. Brazilian shares declined, amid profit taking and expiry of monthly options contracts.
Traders said prices were impacted as investors jockeyed around strike prices of options contracts for key blue chips. Traders expect Brazil’s market to likely become more bullish now that the options expiry is over.
This week’s Central Bank survey showed economists and analysts reduced their forecasts regarding 2005 inflation to an average of 5.76% from 5.78% a week earlier.
While the revision was not major, the direction was downward, bolstering market opinion that Brazil’s Central Bank may refrain from future increases in the base interest rate. Last Wednesday, the monetary authority hiked its benchmark Selic interest rate by 50 basis points to 17.75%.
Also, the University of Sao Paulo’s Fipe inflation index slipped to 0.55% in Brazil’s largest city for the four weeks ended December 15 from 0.57% in the four weeks ended December 7.
The latest consumer inflation reading was in line with estimates from 0.55% to 0.62%. Fipe’s figures demonstrated that inflationary pressure is easing amid the Central Bank’s ongoing efforts to control inflation.
Separately, Brazil posted a current account deficit of US$ 242 million in November, its first monthly deficit since April. Still, based on robust exports and continued foreign direct investment, last month’s result kept Brazil on track for its second straight annual current account surplus in 2004.
Turning to corporate items, long steel maker Gerdau SA reported that it will invest 1.4 billion reais by 2007 to boost its steel output in Rio de Janeiro state and build a new plant to produce specialized steel products for automakers. Gerdau shares fell on the session.
Thomson Financial Corporate Group
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