Brazil’s stocks slip on Spain downgrade, but real currency gains

(Updates to close)

SAO PAULO, May 28 (BestGrowthStock) – Brazilian stocks fell on
Friday, as a Fitch Ratings downgrade of Spain’s credit rating
fueled fears around a euro zone debt crisis.

Brazil’s benchmark Bovespa stock index (.BVSP: ) dropped
0.23 percent to 61,946.99, despite being in positive territory
earlier in the session.

The Bovespa index has shed 2.8 percent this week as
investors, worried about slower global economic growth because
of Europe’s fiscal crisis, have dumped riskier assets.

Those fears spiked on Friday when Fitch cut Spain’s credit
rating by one notch, saying the country’s economic recovery
will be more muted than the government forecast due to its
austerity measures. [ID:nLDE64R25A]

Shares of Banco Santander (Brasil) SA (SANB11.SA: ), the
Brazilian unit of Spanish bank Santander SA (SAN.MC: ), sank
2.93 percent to 18.88 reais.

Markets are volatile at the moment, said Kathryn Rooney
Vera, a senior emerging markets strategist with Bulltick
Capital Markets.

“We expect that to continue in the short term,” she said.

As one of the major emerging markets, widely held among
global investors, Brazil, in particular, will feel changes in
market sentiment, Rooney Vera said. The Bovespa index has lost
about 8.3 percent so far this month through Friday’s close.

Brazil’s currency, the real (BRBY: ), rose 0.88 percent to
1.810 per dollar, after choppy trade, a second straight
session of strengthening.

The Reuters-Jefferies commodities index (.CRB: ) fell as
well, dropping 1.13 percent on the euro-zone fears. The index
has had its worst month in May since November 2008.

Leading the Bovespa lower were shares of pulp and paper
company Fibria Celulose (FIBR3.SA: ), which slumped 3.46 percent
to 28.99 reais.

Banks also helped drag the Bovespa index lower. Itau
Unibanco (ITUB4.SA: ), Brazil’s largest private-sector bank by
assets, lost 0.56 percent to 33.60 reais. Banco do Brasil
(BBAS3.SA: ), Latin America’s largest bank by assets, fell 2.12
percent to 25.89 reais and Bradesco (BBDC4.SA: ) slid 0.3
percent to 29.50 reais.

Limiting losses, state-controlled energy company Petrobras
(PETR4.SA: ), the most heavily-weighted stock in the index, rose
1.4 percent to 28.20 reais.

Yields on Brazilian interest-rate futures contracts
(0#DIJ:: ) largely dipped on Friday, as Brazil’s broadest
inflation measure rose less than expected.

The yield on the contract due January 2011 (DIJF1: ) moved
down a touch to 10.98 percent from 10.99 percent. The yield
on the contract due July 2010 (DIJN0: ) edged to 9.85 percent
from 9.835 percent.

Both were among the most highly traded contracts of the
day.

Brazil’s IGP-M wholesale inflation index (BRIGP=ECI: ) rose
1.19 percent in May. That was the fastest increase in nearly
two years, but nevertheless below the 1.29 percent that was
the median forecast of 23 in a Reuters poll. [ID:nN28143015]

Central bank policy-makers use an inflation target — set
this year at 4.5 percent, plus or minus 2 percentage points —
as a guide in setting the country’s benchmark interest rate,
the Selic.

While the central bank last month hiked the rate to 9.5
percent from 8.75 percent, analysts are divided on how much
policy-makers could raise the rate at their next meeting, over
June 8-9, even as Brazil’s booming economy adds to consumer
price pressures.

Stock Investing

(Reporting by Luciana Lopez; Editing by Jan Paschal)

Brazil’s stocks slip on Spain downgrade, but real currency gains