By Carla Mozee
Brazilian stocks edged lower Thursday, with a decline in
commodities prices on renewed concerns about debt-stricken Greece
pressuring the market's heavily weighted resource stocks.
Brazil's currency was weaker as well following a decision late
Wednesday by the central bank to leave its key interest rate
unchanged at 8.75%, a record low.
The Bovespa index, however, managed to recover from deeper
losses. The index fell 24 points to 69,697.33, with losses led by
mining and oil issues. The decline in Brazil was in largely step
with equity markets worldwide, in the wake of media reports that
Greece may turn to the International Monetary Fund for support if
it doesn't receive aid from the European Union.
"The renewed concerns about Greece may have encouraged some
profit-taking," currency strategists at RBC Capital Markets wrote
Thursday.
On Wall Street, the S&P 500 Index (SPX) closed with a loss
of less than 1 point at 1,165. The Dow Jones Industrial Average
(DJI) posted a gain of 0.4%.
Elsewhere in Latin America, Mexico's IPC index reversed course
to close up 0.5% at 32,969.83, Argentina's Merval shed 0.3% to
2,374.26.
Chile's IPSA picked up 3 points to 3,802.23 ahead of the central
bank's interest-rate decision, its first since a deadly earthquake
struck the country on Feb. 27. Late Thursday, policymakers met
market expectations by holding the rate unchanged at the
historically low level of 0.5%.
In Sao Paulo, most mining stocks, which make up about 30% of the
Bovespa, were lower. Steel producer CSN (SID) fell 0.9% and MMX
Mineracao lost 2.5%. Vale (RIO) gave up 0.7% but Gerdau (GGB)
climbed out of the red to end up 0.1%.
Shares of oil and gas producer OGX (OGXPY) fell 1.8% and
state-run oil giant Petrobras (PBR) slipped 0.4%, losing grip on a
modest rise. Petrobras' fourth-quarter earnings report is due
Friday.
Crude for April delivery fell 0.9% to $82.20 a barrel, and
copper and silver futures fell, hurt by a rise in the greenback
against the euro and its other rivals following the reports of
Greece's possible turn to the IMF. Greek Prime Minister George
Papandreou told reporters in Brussels that the country would prefer
E.U. measures, but that the IMF remained an option.
The dollar index (DXY), which measures the greenback against a
trade-weighted basket of six major currencies, rose 0.7%.
Telecom shares finished mostly lower. Wireless-services company
Vivo (VIV) fell 1.1% but integrated telecom firm Oi (TNE) picked up
1.1%.
Advancers during the session included aircraft maker Embraer
(ERJ), up 0.4% ahead of its fourth-quarter results.
Brazil rate unchanged
In the foreign-exchange market, Brazil's currency lost ground,
trading at 1.787 reals against the dollar compared with 1.766 reals
on Wednesday. Among exchange-traded funds, the iShares MSCI Brasil
Index (EWZ) lost 1.5%.
The central bank late Wednesday left the key Selic rate
unchanged. The vote was split, with five committee members voting
to leave the rate unchanged while three wanted a rate hike.
Rising inflation figures and expectations heading into
Wednesday's meeting lifted market expectations that the central
bank would begin its rate-tightening cycle in March.
But the decision "was not a surprise," Bertrand Delgado, a
senior analyst covering Latin America and emerging markets at RGE
Monitor in New York, said in a telephone interview.
"Although inflation expectations have moved up very quickly, the
long-term and medium-term expectations are still somewhat
anchored," close to the central bank's inflation target of 4.5%, he
added.
Inflation so far this year has been mainly influenced by
seasonal factors and an increase in public fares, especially in
transportation, according to Delgado. "Although food continues to
pressure inflation, after March we'll see some normalization on
inflation dynamics, and that should bring down inflation
expectations for this year and perhaps next year."
The central bank will raise interest rates this year, but the
question is when, he said. Delgado expects a rate hike at the April
meeting, in part because of "political noise" surrounding the
possible departure of central-bank chief Henrique Meirelles, who
may seek to run for public office in October.
"It's an electoral year, and it is better that the next head of
the board hike rates rather than the last one," Delgado commented.
RGE expects the Selic rate to end the year at 11.25%.