Brazil stock traders recoil at Volpon’s rate call as real climbs

Denyse Godoy, Paula Sambo, and Filipe Pacheco – Bloomberg Business, 7/21/2015

Brazilian shares dropped to an almost four-month low on speculation borrowing costs at Latin America’s largest economy will increase further, curbing prospects for equities. The real advanced for the first time in four days.

The Ibovespa extended this month’s slump after central bank director Tony Volpon said policy makers should keep raising interest rates until the outlook for inflation reaches the government’s target. The benchmark stock gauge has tumbled 11 percent from this year’s peak on concern the decision to boost the Selic to a six-year high to tame consumer prices will deepen an economic contraction.

“The central bank will probably increase rates again next week in a trend that’s damaging the economy and prospects for companies,” Pedro Paulo Silveira, the chief economist at brokerage TOV Corretora, said by phone from Sao Paulo.

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Brazil economy still faltering, with GDP contraction on par with Russia’s

Kenneth Rapoza – Forbes, 6/19/2015

Brazil’s economy is grinding to the bottom. But the bottom doesn’t appear to have been hit just yet.

The monthly GDP proxy at the Central Bank of Brazil, known as the IBC-Br index, surprised on the downside on Friday by falling 0.84% in April. That’s from a downwardly revised -1.51% decline in the previous month and is now compatible with a yearly drop of 3.13%.

Putting this into perspective, Brazil’s BRIC counterpart Russia is expected to contract 3.25% this year and its economy is facing weaker oil prices and sanctions against its oil and finance companies. Brazil is moving in line with a sanctioned economy that is over dependent on one commodity, while Brazil has good relations with the world and a much more diverse economy.

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Brazil contracts more than expected in April

Financial Times, 6/19/2015

Brazil’s first quarter contraction was bad. But the second quarter is shaping up to be even worse.

The Brazilian central bank’s IBC-Br index, a preliminary indicator of GDP growth, showed that Latin America’s largest economy contracted for the sixth time in the past seven months.

Economic activity fell 0.8 per cent in April from March as successive interest rate hikes and the austerity measures implemented by Joaquim Levy, Brazil’s new market-friendly finance minister, take their toll on the economy.

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Brazil Central Bank reduces rollover pace of currency swaps again

Stephen Eisenhammer – Reuters, 6/17/2015

Brazil’s central bank decided on Wednesday to reduce again the rollover pace of currency swaps that mature early next month, a move that is likely to weigh on the Brazilian real.

The bank said in a statement that it would auction on Thursday as many as 5,200 currency swaps to roll over similar contracts that mature on July 1.

Last week, the bank cut its offering to 6,300 from 7,000 contracts per day.

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Brazil freezes $13.7 billion from budget to meet fiscal goal

Maria Luiza Rabello, Matthew Malinowski – Bloomberg, 05/22/2013

Brazil’s government has frozen 28 billion reais ($13.7 billion) in its 2013 budget as it tries to meet its primary surplus target, Finance Minister Guido Mantega said.

Officials did not freeze portions of the budget set aside for investments and hosting the World Cup soccer tournament, Mantega told reporters today in Brasilia. The government may increase abatements against this year’s fiscal surplus goal to 45 billion reais, Mantega said, up from February’s estimate of 25 billion reais.

President Dilma Rousseff’s administration this year is seeking to meet Brazil’s primary surplus goal of 155.9 billion reais without undermining economic growth. Authorities have extended tax cuts and increased spending to spur the economy, even as such measures have helped keep annual inflation near the 6.5 percent upper limit of the central bank’s target range.

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Brazil real stronger in thin volume, with Central Bank absent

Tom Murphy – The Wall Street Journal, 13/02/2013

SAO PAULO–The Brazilian real ended active trading Wednesday slightly stronger against the Friday close in thin post-holiday volume.

The real ended active trading at BRL1.9642 to the dollar, stronger from the Friday close of BRL1.9698, according to Tullett Prebon via FactSet. Brazilian markets were closed Monday and Tuesday for the annual Carnival festivities.

Traders said there was little pressure from either side of the market Wednesday, with the real drifting to a stronger position on U.S. dollar inflows from foreign investors, mainly in Brazilian stocks, and from overseas bond issues by Brazilian companies.

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Brazil’s inflation problem

Sujata Rao – Reuters, 01/16/2013

When will Brazil’s central bank admit it has an inflation problem? Markets will be watching today’s rate-setting meeting for clues.

There is no doubt about the outcome of today’s meeting at the Banco Central do Brasil (BCB) — no one expects it to do anything but leave interest rates steady at the current 7.25 percent. But the BCB has been focused on growth for 18 months and has cut interest rates by 525 basis points in this time, its actions helping to drive the real 10 percent lower last year versus the dollar. The government meanwhile has unleashed huge doses of fiscal stimulus. The result, rather than a growth recovery, is a steady rise in inflation.

Goldman Sachs’ Latin America economist Alberto Ramos points out that Brazilian inflation came in above the 4.5 percent target for the third straight year in 2012 and the balance of inflation risks has deteriorated. Gasoline prices are to rise from next week and drought is making hydro-power generation more costly. Analysts polled by Reuters expect 2013 price growth at 5.53 percent. Ramos writes:

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