Foreign Investors Keep Selling Brazilian Assets and Stocks Are Down 15% in 2010

    Brazil's stock exchange

    Brazil's stock exchange Bovespa, Brazil’s  stock index and the real, the Brazilian currency, lost ground for a sixth straight session Thursday as investors continued to sell local assets given the depressed global economic outlook following on fears about the euro fiscal crisis and disappointing data on the health of the US economy.

    Bovespa was down 2.5% at 58,192 points after ending at 59,689 points Wednesday. With Thursday decline, the index has reached its lowest level since Sept. 9 and is down by 15.2% so far this year.

    The Brazilian currency Real also slipped 1% ending at 1.861 to the US dollar.

    A sustained weakening of the Euro brought continued negative impact for Brazilian materials sector shares, as prices of key commodities continued recent declines threatening the country’s export. Making matters worse the US Labor Department on Thursday reported jobless claims rose 25,000 in the week ending May 15 to 471,000.

    Locally, the market pondered a continued acceleration in inflation. Brazil’s IBGE statistics institute reported IPCA consumer price inflation advanced by 0.63% in early May from 0.48% in April. The figure brought 12-month inflation to 5.26%.

    The surging inflation has helped stoke concerns Brazil’s central bank will be forced to take a hard line in a recently begun monetary-policy tightening cycle. Brazil’s Central bank raised the country’s reference Selic rate 75 basis points last month to 9.5% annually. The hike was the Central bank first in nearly 20 months.

    According to market estimates, the Selic rate is seen rising about 225 basis points by the end of this year to 11.75% annually.

    However next October Brazil goes to the polls to elect a new president and policy makers could be reluctant to press on the brakes too hard or suddenly.

    While Brazilian economic growth prospects appear to remain good this year, with forecasts above 7%, analysts note local markets still are a ripe target for capital withdrawals by international players seeking to send funds to safe-haven investments elsewhere.

    To that effect former president of the Central Bank Armínio Fraga warned Brazil isn’t prepared for economic growth of 6% or 7% a year because of inflationary pressures and infrastructure “bottlenecks.”

    In an interview with daily O Estado de S. Paulo Armínio Fraga said all the “mature” global economies are in a “very worrying fiscal situation” and the financial crisis “may worsen.”

    Fraga said the situation won’t lead to the end of the euro unless there is a “gigantic collective error in economic policy.”

    Earlier this week the Central Bank index of economic activity said the Brazilian economy was up 2.38% in the first quarter compared to the fourth quarter of 2009 and 9.84% over the first quarter a year ago.

    Finance Minister Guido Mantega said Wednesday that the Brazilian economy would generate two million formal jobs in 2010 after having created almost one million in the first four months, almost the same as in the whole of 2009.
     
    Mercopress

    Tags:

    • Show Comments (0)

    Your email address will not be published. Required fields are marked *

    comment *

    • name *

    • email *

    • website *

    This site uses Akismet to reduce spam. Learn how your comment data is processed.

    Ads

    You May Also Like

    Prison Gang PCC Turns 13, Afraid Brazil Police Go on Red Alert

    The PCC (First Command of the Capital), the prison gang that has been terrorizing ...

    Music: Brazil’s Latest Export Product

    Brazil wants to show its beat. If this is the country of music, why ...

    Edmar Bacha

    Architect of Plan Real Says Brazil Needs Education to Avoid Curse of Natural Resources

    Edmar Bacha, a leading Brazilian economist and one of the architects behind the 1994 ...

    Jóias do Pantanal

    This Brazilian’s Cattle Horns Jewels Became a Hit in the US and Europe

    Isabel Muxfeldt’s idea of making cattle horns into female jewels worked out. Muxfeldt is ...

    Brazil Praises Encounter Between Lula and EC President

    Brazil’s Minister of Finance, Antônio Palocci, said that the  Janunary 28 meeting between Brazilian ...

    Brazil Has Reason to Smile, Says Lula

    Brazilian President Luiz Inácio Lula da Silva devoted today’s edition of his biweekly radio ...

    Brazilian president Lula and Spanish counterpart Zapatero

    Brazil Lula’s Biofuel Boosting Tour Takes Him to Spain

    Brazilian President Luiz Inácio Lula da Silva arrived this weekend in Spain where beginning ...

    Spain Works Out Details to Convert Brazil’s Debt into Education Investment

    The conversion of part of Brazil’s foreign debt into investments in education was one ...

    CANGAÇO E VOLANTES

    With the admission of women in 1930, cangaceiros became more tolerant and less nomadic, ...