Brazil stocks choppy, real falls on Europe fears

SAO PAULO, June 7 (BestGrowthStock) – Brazilian stocks seesawed in
volatile trading on Monday after a surprise surge in German
industrial orders helped allay some fears over a euro zone debt
crisis slowing down the global economic recovery.

Such concerns have pushed investors to dump higher-risk
assets in recent weeks and flee emerging markets such as
Brazil. But the European debt crisis does have some benefits,
said Andre Perfeito, an economist at Gradual Investimentos in
Sao Paulo.

“The main advantage is the boost the weak euro will give to
German exports, bringing some dynamism to that struggling
economy,” he said.

German industrial orders jumped 2.8 percent in April from
the previous month, far exceeding forecasts of a 0.2 percent
gain and adding to signs that Europe’s largest economy is on
the path to durable growth. For details, see [ID:nLDE656107]

However, after gaining as much as 0.7 percent early in the
session, Brazil’s main equity index, the Bovespa (.BVSP: ), was
flat in midday trading at 61,691.78 points, as Europe fears
lingered.

Latin America’s largest economy’s stocks suffered their
heaviest losses in over a week last Friday due to disappointing
U.S. jobs data and concerns that Hungary might be facing a
similar debt crisis to the one that has been plaguing Greece,
among other nations.

Mining giant Vale (VALE5.SA: ), the world’s largest producer
of iron ore, weighed on the index, losing 1.8 percent to 40.15
reais as commodity prices fell.

State-run energy company Petrobras (PETR4.SA: ) offered some
support, creeping 1.1 percent higher to 29.58 reais. Petrobras
shares — the most heavily-weighted in the Bovespa index —
have been boosted recently by deep-water oil discoveries.

The country’s currency, the real (BRBY: ), weakened 0.5
percent to 1.869 per dollar on the local spot market, as
nervous investors took refuge in the greenback.

Perfeito said investors in Brazil were cautious ahead of
this week’s rush of economic data, which includes gross
domestic product figures on Tuesday and consumer prices on
Wednesday.

INFLATION CONCERNS EASE

Investors also adjusted bets on Brazil’s interest rate
outlook after economists revised downward their year-end
inflation estimates for the first time in almost five months.
[ID:nN07186883]

Economists see Brazil’s IPCA inflation index at 5.64
percent in full-year 2010, compared with 5.67 percent a week
earlier, according to a weekly central bank survey released on
Monday.

Changes in yields on Brazilian interest rate futures
contracts (0#DIJ:: ) have been closely watched by investors who
fear that the country’s booming economy could be overheating.

The yield on the contract due January 2011 (DIJF1: ), among
the morning’s most popular, edged up to 10.95 percent from
10.92 percent. The yield on the contract due January 2012
(DIJF2: ) ticked up to 11.82 percent from 11.81 percent.

The central bank, which sets monetary policy with an
inflation target in mind, will decide on interest rates on
Wednesday, with most analysts forecasting a 75-basis-point
increase to 10.25 percent. [ID:nSPG002929]

This year the bank’s inflation target is 4.5 percent, plus
or minus 2 percentage points.

Brazil already has some of the highest interest rates in
the world — a legacy of the country’s acute problems with
inflation in the 1980s and 1990s.

Investment Basics

Brazil stocks choppy, real falls on Europe fears