Brazil markets boosted by telecoms, relief on US rates

04 Jul, 2004

Brazil's financial markets gained on Friday as an upbeat outlook for US interest rates and a court decision allowing utility companies to hike tariffs sent investors on a buying spree.
The Sao Paulo Stock Exchange's benchmark Bovespa index gained 1.03 percent to 21,568.3 points, rising for the fourth straight session.
The index has climbed 4 percent in the week on optimism that US interest rates will not rise at a fast enough pace to deter investment in South America's biggest economy.
Brazil's currency, the real, strengthened 1.14 percent to 3.040 per greenback, also gaining for the fourth consecutive session.
Traders said US data showing a sharp slump in job creation in June helped ease fears a strong monetary tightening in the United States would take the shine of emerging markets such as Brazil.
The Labour Department said on Friday that employers added 112,000 jobs last month, far less than the 250,000 economists had forecast.
"With job creation below expectations in the United States, the Fed wouldn't have much reason to raise rates strongly," said Adriano Fontes, a fund manager at ARX Capital Management in Sao Paulo.
"Stocks could face a bit of a correction next week, but in the absence of actual events, we'll get a positive period now," he added.
Telecommunications shares led the gains for a second day following a court decision on Thursday to allow fixed-line telephone operators to raise fees using a higher inflation index.
Shares of blue-chip Tele Norte Leste Participacoes (Telemar) rose nearly 2 percent to 41.30 reais, while fixed-line operator Telefonica do Brasil gained 5.9 percent to 49.99 reais.
Another stock to benefit from the utility rate increase was Sao Paulo power distributor Eletropaulo, which jumped 7.9 percent at 63.50 reais.
Brazil's National Electric Energy Agency ANEEL on Thursday allowed the company to increase tariffs by 17.91 percent.
"The rate adjustments for the telephone operators and the power sector pushed the market higher, since these stocks have a heavy weighting in the Bovespa index," said Ademir Carvalho, a trader at Finabank brokerage in Sao Paulo.

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