Brazil stocks slip ahead of rate decisions

SAO PAULO, Jan 27 (BestGrowthStock) – Brazilian stocks fell in
choppy trade on Wednesday, as investors awaited interest rate
decisions by central banks in Brazil and the United States.

Brazil’s benchmark Bovespa stock index (.BVSP: ) edged lower
0.42 percent to 65,236.01 early in the session after closing
below 66,000 for the first time this year on Tuesday.

In the U.S., the world’s largest economy, Federal Reserve
policymakers were expected to keep rates near zero on
Wednesday. For details, see [ID:nN26123227]

Still, U.S. central bank officials have said recently that
they are developing an exit strategy from the massive stimulus
injected into the U.S. economy during the global economic
crisis.

In Brazil, the central bank is also expected to hold rates
at the conclusion of its two-day policy meeting Wednesday. The
country’s benchmark interest rate, the Selic, is currently at a
record low 8.75 percent. [ID:nSPG002699]

However, the statement accompanying policymakers’ decision
will be scrutinized for clues about when the bank could hike
rates. As Brazil’s economy has returned to growth, there has
been little consensus on when policy could tighten.

The decision in Brazil is expected after the close of
markets.

“Inflation is key here,” Kathryn Rooney, a senior emerging
markets strategist with Bulltick Capital Markets, said in
reference to Brazil.

Expectations for inflation this year in Brazil have begun
increasing, with a survey by the central bank showing this week
that local economists see the rate hitting 4.6 percent this
year, up from previous expectations of 4.5 percent.

The central bank’s 2010 inflation target, which it uses as
a guide in setting interest rates, is 4.5 percent, plus or
minus two percentage points.

“Volatility seems to still be the name of the game,” Rooney
added.

Brazil’s currency, the real (BRBY: ), extended a losing
streak, weakening 0.93 percent to 1.853 per dollar near midday,
working on its seventh straight losing session.

Within the Bovespa, mining company Vale (VALE5.SA: ) shed
2.09 percent to 41.71 reais. The company said Wednesday it
agreed to pay $3.8 billion in cash for Bunge Ltd’s (BG.N: )
fertilizer assets in Brazil, including Fosfertil (FFTL4.SA: ), a
leading fertilizer company. [ID:nN27166536]

Shares of Fosfertil, which is not part of the Bovespa
index, gained 1.84 percent to 19.34 reais.

Goldman Sachs cut price targets for Brazilian banks Itau
Unibanco and Bradesco, and shares of both fell. Itau Unibanco
(ITUB4.SA: ) lost 1.87 percent to 35.66 reais, and Bradesco
(BBDC4.SA: ) slipped 1.75 percent to 31.38 reais.

Goldman raised its target for credit card processing
company Redecard (RDCD3.SA: ), which gained 0.48 percent to 27.23
reais.

Changes in yields on Brazilian interest rate futures
contracts (0#DIJ:: ) were mixed.

The yield on the contract due January 2011 (DIJF1: ) traded
flat at 10.4 percent. The yield on the contract due July 2010
(DIJN0: ) inched to 9.17 percent from 9.18 percent.

Both were among the most active contracts in the morning.

Investors use the contracts to bet on trends in the Selic.

Investing

(Reporting by Luciana Lopez; editing by Jeffrey Benkoe)

Brazil stocks slip ahead of rate decisions