Brazilian shares dip

Brazilian stocks edged lower on Friday while the currency gained ground against the US dollar in a mixed reading of a decision by the US Federal Reserve to reverse some of its monetary stimulus measures. Local equities fell after the Fed late on Thursday announced an increase in the emergency lending rate it charges banks. But the downside was limited after tame US inflation data helped appease some fears that this was the beginning of a broader tightening cycle in the United Sates.
The benchmark Bovespa stock index dipped 0.35 percent to 67,597.43, bucking two sessions of gains as investors sought to cut positions in oil company Petrobras and mining giant Vale. "What the Fed signalled yesterday was that in fact it won't tighten monetary policy but move very slowly towards the normalisation of the rate," said Roberto Padovani, senior Brazil economist with WestLB in Sao Paulo, adding that US rates at the moment did not reflect the level of economic activity.
Brazil's currency, the real, also strengthened against the dollar, even as the latter climbed across the board after the Fed move. The real rose 0.9 percent to 1.805 reais per dollar - its strongest since late January. The currency gained for a third day, boosted by almost $3 billion in local sales of dollar holdings by non-resident investors.
According to data by BM&FBovespa, which operates the leading stock, commodities and derivatives exchange in the country. Petrobras shares fell 0.98 percent to 34.35 reais even as oil firmed, while Vale, the world's biggest iron ore producer, shed 0.22 percent to 45.10 reais. Some steelmakers also fell. CSN, the nation's second-biggest maker of flat steel, shed 0.7 percent to 59.17 reais.
The company is involved in a bidding war for Portuguese cement maker Cimpor with two other Brazilian companies. A plan to extend the deadline of a tender offer for Cimpor through February 22 and a possible counterbid to win at least 33 percent of the Portuguese company could "weigh on its shares," Itau Securities analyst Marcos Assumpcao said of CSN.
Yields on Brazilian interest rate futures contracts were broadly higher after inflation readings for the nation's broadest price index came at the high end of expectations and the Fed move led some investors to seek a premium on borrowing costs. The yield on the January 2011 contract, the most widely traded in Sao Paulo, climbed 0.1 percentage point to 10.28 percent.