News Room - Business/Economics

Posted on 12 Oct 2009

Brazil stocks touch year-high on economy hopes

Brazilian stocks rose to a fresh high for the year on Friday as optimism about Brazil's economic rebound overcame an early bout of profit-taking.

 

The benchmark Bovespa index rose 0.45 percent to 64,046.07, hitting a new intraday high for the year after earlier dipping into negative territory.

 

Brazil's currency, the real (BRBY), weakened 0.17 percent to 1.741 per dollar as investors pushed the beleaguered greenback higher.

 

"The market isn't operating with 2009 in mind, it's thinking of 2010," said Andre Perfeito, an economist with Gradual Investimentos. "Everyone thinks 2010 is going to be an excellent year (for Brazil)."

 

The index rose 1.79 percent on Thursday, closing above 63,000 points for the first time since July 1, 2008. It has gained nearly 70 percent so far in 2009.

 

The dollar got a bounce after U.S. Federal Reserve Chairman Ben Bernanke said late on Thursday that the stimulus measures in the world's largest economy could not continue indefinitely.

 

While Fed policymakers have said as much before, the talk of an exit strategy at some point heartened investors, who boosted the dollar. The greenback had fallen to a 14-month low against a basket of major currencies .DXY on Thursday as traders turned away from the safe-haven currency.

 

The dollar's strength nudged down the 19-commodity Reuters-Jefferies index .CRB, which slipped 0.24 percent. Crude oil CLc1 seesawed on those pressures, too, as well as well-stocked inventories.

 

The Bovespa index includes a number of companies tied to commodities, including Petrobras and Vale, the two most heavily weighted shares in the index.

 

State-controlled energy giant Petrobras led gains, adding 0.71 percent to 35.70 reais.

 

Vale, the world's largest iron ore producer, inched up 0.26 percent to 38.70 reais.

 

Banks added to recent gains. Itau Unibanco rose 1.07 percent to 36.03 reais, Banco Bradesco advanced 1.41 percent to 36.05 reais and Banco do Brazil, Latin America's largest bank by assets, moved up 1.82 percent to 30.80 reais.

 

Limiting gains were shares of cellular telecommunications company Vivo Participacoes, which sank 2.55 percent to 48.60 reais. Banif Securities downgraded the shares from buy to neutral on Thursday.

 

Yields on Brazilian interest rate futures contracts were mixed. The yield on the contract due January 2011 DIJF1 slid to 10.43 percent from 10.45 percent. The yield on the contract due January 2012 DIJF2 dipped to 11.48 percent from 11.49 percent. Both were among the most actively traded contracts of the morning.

 

The contracts reflect expectations among investors of future interest rates in Brazil. The benchmark rate, the Selic, currently stands at a record-low 8.75 percent after central bank policymakers eased monetary policy to try to jump-start Brazil out of a recession.

 

Brazil's financial markets will be closed on Monday for a national holiday.