Brazil’s Central Bank Hikes Interest Rates to 18.25%

    In spite of the expected interest rate hike by the Brazil’s central bank Brazilian stocks keep rising. On the U.S. economic front, the consumer price index fell 0.1% in December, versus a 0.2% increase the prior month.

    The core index rose 0.2%, compared with a 0.2% gain in November. Economists
    had expected both the CPI and the core index to rise 0.2%.

    Brazil’s benchmark Bovespa Index recovered 182.04 points, or 0.76%. Brazilian
    equities firmed, despite expectations for a hike in interest rates after the
    close by the Central Bank.

    Most traders appeared to have already priced in an expected hike of the
    benchmark Selic rate by 50 basis points to 18.25%. In fact, the bank did hike
    the reference lending rate as expected in an attempt to limit inflation
    following market hours.

    “Continuing with the process of adjusting basic interest rates that started
    in September 2004, Copom decided, unanimously, to raise the Selic rate to 18.25%
    per year without any bias [for future policy],” the bank’s monetary policy
    committee remarked.

    Brazilian shares were also bolstered by a decline in crude oil prices, as the
    country is a net importer of crude oil and oil products.

    In earnings news, Votorantim Celulose e Papel SA said its net profit rose
    2.2% to a record 790 million reais in 2004 from the prior year.

    The company explained, “The world market showed signs of recovery in the
    fourth quarter of 2004, with renewed discipline among producers and the return
    of both Chinese and European buyers with a view toward rebuilding stocks.”

    The Brazilian paper and pulp firm also posted earnings before interest,
    taxes, depreciation and amortization that rose 14% to a record 1.269 billion, as
    net revenue climbed 17% to 2.981 billion. That issue advanced.

    Also, Brazilian mining giant Companhia Vale do Rio Doce SA announced
    Wednesday that it will invest US$ 3.33 billion this year, nearly doubling 2004’s
    capital spending in an effort to increase output of metals like iron and
    aluminum and move the products more quickly to port. Sellers were active in

    Shares of aircraft manufacturer Embraer continued higher, after the company
    announced late Monday that it delivered 42 aircraft in the fourth quarter and
    148 aircraft in 2004. The yearly number exceeded the jetmaker’s delivery target
    by three jets.

    Cellular phone company stocks performed especially well, after analysts noted
    that a revision of fees charged on calls between fixed-line and mobile phones,
    to be negotiated over the next few weeks, likely will favor the mobile phone

    Thomson Financial Corporate Group



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