Brazil Stocks Keep Downhill Course

    Brazilian shares dragged amid continued profit taking, with the selling activity heightened by fears of aggressive U.S. interest rate hikes. On that front, minutes released yesterday from the U.S. Federal Open Market Committee’s December 14 meeting showed a number of its members were concerned that the dollar’s recent depreciation, higher energy costs and a possible slowdown in productivity growth may boost inflation.

    Brazil’s benchmark Bovespa Index slid 156.24 points, or 0.63%. Brazilian issues continued lower on profit taking that was exacerbated by worries over further interest rate hikes in the U.S.

    Brazilian analysts interpreted the minutes from the Fed’s December meeting as a precursor to further interest rate increases in the U.S., which could draw investment away from Brazil.

    In corporate news, Spain’s largest mobile operator, Telefonica Moviles SA, announced that the entire capital increase of Brazilian subsidiary Telesp Celular Participações SA has already been subscribed.

    Moviles stated that Telesp Celular Participações will receive 2.05 billion reais in the deal. TCP rose.

    Also, Embratel shares climbed, after the Brazilian long distance carrier’s shareholders unanimously approved a capital increase of US$ 700 million at a meeting.

    Low-frills airline Gol Linhas Aéreas SA said that it will begin two additional weekly flights to Buenos Aires, Argentina, on January 8 to fill customer demand from Southern Brazil.

    Turning to research, an influential brokerage started coverage on Brazilian electricity utility CPFL Energia with a “buy” rating and a price target of US$ 25.67 per American Depositary Receipt.

    The analyst wrote, “We see a positive outlook for the stock,” as the company should benefit from “improvements in distribution regulation; the start-up of its generation projects in 2004-2008; and its position as a dominant private player in a market that we think is ripe for consolidation.”

    Thomson Financial Corporate Group



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