Brazil stocks decline on low inflation

10 Oct, 2004

Brazil's main stock index slipped to end below the psychologically important 24,000 point level on Friday.
The country's currency, the real, gained 0.81 percent to finish at 2.829 reais per US dollar.
The Sao Paulo Stock Exchange's benchmark Bovespa index fell 0.74 percent to 23,926, giving up much of the week's strong gains as world crude oil prices rose above $53 a barrel to new records that, if sustained, could derail the global economy.
"People really wanted to book gains before the long weekend and oil prices are worrisome. These factors overwhelmed the good news of a stronger real," said Mario Fernando, an equities trader at TOV brokerage in Sao Paulo.
Brazil's markets will be closed on Tuesday for a holiday honouring the country's patron saint and many traders will also take Monday off.
Initially, stocks rose on weak US employment figures as they could lower the chances the Federal Reserve will raise US interest rates and draw
investment away from Brazilian assets, but stocks later slipped.
Big losers included steelmaker Usiminas, which fell 3.73 percent to 45.90 reais. Bellwether Tele Norte Leste lost 0.05 percent to 39.45 reais.
Shares for wood pulp maker Aracruz Celulose ended 0.94 percent lower at 9.46 reais even though it reported net profit in the third quarter more than double that of a year earlier at 368 million reais.
The real was boosted by the weaker-than-expected US jobs data and by falling domestic inflation.
Brazil's IPCA index, the benchmark inflation index the central bank uses to guide monetary policy, rose 0.33 percent in September, compared to August's increase of 0.69 percent.
"The IPCA number was exceptional for the market. Certainly the central bank will be less pressured to raise rates at the next (monetary policy-setting) meeting," said Carlos Camacho, a stock trader at GAP Asset Management.
The result could mean the bank will hike its base Selic interest rate by only a quarter percentage point this month to 16.50 percent, instead of a half-point as was widely expected.

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