Brazilian investors went back into a buying spree, this Tuesday, September 30, in search of stocks that had become very cheap on Monday after the panic that swept Brazil's market with the Bovespa index dropping 9.36%.
The quest-for-bargains movement allowed the São Paulo stock exchange to register a strong increase, but not enough to compensate for the previous day's losses and much less for the devaluation that occurred during September.Â
The Ibovespa, the Bovespa index, went up 7.63% with the market reaching 49,541 points at closing time. The stocks had a 11% slump in September.
This was Bovespa's second largest jump in almost 10 years. At the end, 4.87 billion reais were traded, below the September average (5.5 billion reais) and below the year average (5.9 billion reais).Â
The recovery was helped by the big companies like state-controlled oil multinational Petrobras and mining firm Vale do Rio Doce. Petrobras's stocks went up 7.17% generating 737 million reais while Vale climbed 7.95% bringing in 457 million reais.
The dollar, on the other hand, fell 3.15% being traded at 1.904 reais per dollar. The American greenback contrary to the stock market had a 16.45% boost this month alone. The so-called country-risk rating, however, has suffered a bruise declining to 305 points, 8.13% below the Monday rating.
Stock markets in Latinamerica crashed on black Monday 29, following the US House of Representatives rejection of the bi partisan bailout package which had been painfully stitched over the weekend.
Brazil's Bovespa suffered its greatest loss in one day since 1999. Trading dropped 13.8% before beginning to recover towards the end of the day.
Before Brazilian President Luiz Inácio Lula da Silva had to come out and insist that the global financial crisis would have a limited contagion for Brazil.
Trading had to be stopped for 30 minutes after the crash reached the 10% threshold but once restarted continued to fall until at the end of the day the index settled at 46.028 points, down 9.4%. On January 14, 1999, Bovespa also crashed 10% when trading was stopped.
All industries lost ground particularly steel makers and the world's largest iron ore producer Vale do Rio Doce SA. This was motivated by fears that the world slowdown might affect directly the steel and construction industries.
In Argentina the MERVAL index skid 8.7% and in Mexico the IPC, 6.4%; in Chile the loss was 5.7% and in Colombia, 2.37%.
For Chile it was the worst daily fall in a decade and for Argentina's Merval the blackest day since February 11, 2002 when the market crashed 10.68%. The Argentine stock exchange has lost 13,5% in September and 30% since the beginning of the year.
As happened with São Paulo, steel, oil and banks were the stocks which most suffered.
Four of South America's leaders meeting in the Amazon accused the United States on Tuesday of "irresponsibility" in its handling of a financial crisis that has dried up credit markets and threatens economies around the world.
Lula said that rich nations are responsible for the global financial crisis, and called on the US Congress to pass a solution quickly. Emerging markets, including Brazil, are better prepared to weather the crisis than the US, he said.
"We did our homework and they didn't," Lula said. "Those who spent the last three decades telling us what to do didn't do what they had to do. The crisis is very serious and so profound that we don't know how big it is".
Venezuelan President Hugo Chavez warned the crisis could slow economic growth across Latinamerica and predicted that US economic power is in dramatic decline.
"This crash of capitalism and of neo-liberalism will be worse than that of 1929," Chavez told reporters at the Manaus city meeting. "No country can say it won't be affected''.
Oil prices should stabilize between 80 and 95 US dollars a barrel said Chavez who added that the credit crisis in the US will likely make it more difficult to obtain financing in Latin America.
The crisis has already started to hurt lending in Brazil, revealed Altamir Lopes, head of the economic research department for Brazil's central bank. External funding for corporate loans dropped in the first two weeks of September compared with a month earlier, he added.
"The world will never be the same after this crisis. A new world has to emerge, and it's a multi-polar world," he said. "We are decoupling from the wagon of death".
Many Latin American countries depend heavily on exports of commodities, such as oil, soy, copper and bananas, and falling prices combined with tighter credit are raising fears of a sharp slowdown.
With world money markets in trouble, policymakers are hoping the US Congress will quickly revive and approve a 700 billion US dollars rescue package that would allow the US Treasury to buy up bad debt from struggling banks.
But Bolivian President Evo Morales, who is a close ally of Venezuela's Chavez and has nationalized the natural gas industry as part of his socialist reforms, criticized the US plan as a bailout for the rich.
"In Bolivia, we nationalized for the people to have money, while the United States wants to nationalize debt and a crisis of the wealthy," Morales said.
Ecuador's Rafael Correa fresh from Sunday's overwhelming victory in the constitutional referendum said speculation and the Wall Street casino economy were to blame for the current global crisis and vindicated his government's growing role in the country's economy.