EMERGING MARKETS-Brazil's real drops as optimism over Rousseff remains shaky

viernes 31 de octubre de 2014 14:01 GYT
 

By Bruno Federowski
    SAO PAULO, Oct 31 (Reuters) - Brazil's currency weakened
sharply on Friday as investors reconsidered a wave of optimism
that took hold in the previous session after the country's
central bank unexpectedly raised the benchmark interest rate.
    The Brazilian real  weakened more than 2
percent, just short of erasing the previous day's gains.
Brazil's Bovespa stock index continued to rebound from
earlier this week when it hit its lowest level since April.
    The reelection of President Dilma Rousseff on Sunday sent
shockwaves through Brazil's financial markets and fed heavy
volatility throughout the week. While most investors would have
preferred her market-friendly challenger Aecio Neves, they are
now focusing on whether Rousseff will begin making policy
adjustments in their favor.
    Pro-market names being floated for the next finance minister
and the central bank's more hawkish stance on inflation have fed
those bets, though traders said the real's 2.4 percent gain
against the dollar on Thursday was overdone.
    "As we had exaggerated pessimism over Rousseff's reelection,
we had exaggerated optimism yesterday," said Glauber Romano, a
trader with brokerage Intercam in Sao Paulo.
    Romano said the market will need to see an improvement in
the government's fiscal numbers before having confidence in a
more market-friendly economic policy.
    Investors got the opposite on Friday when Brazil posted its
biggest monthly deficit ever, underscoring a rapid deterioration
of the fiscal accounts and putting the country at risk of ending
2014 with its first annual primary deficit in nearly two
decades. 
    "That's the kind of number that makes someone who was
optimistic think twice," said Celso Siqueira, head of currency
at brokerage Advanced in Sao Paulo.
    Brazil's Bovespa stock index rose 3 percent but that was not
enough to close the month in the black. Gains on Friday were
driven by shares of state-run oil company Petroleo Brasileiro SA
, known as Petrobras, which rose nearly 5 percent. 
    Traders are watching for a potential increase in
government-controlled fuel prices within the next few days,
which would support the company's bottom line.
    Telecommunications firms TIM Participacoes SA and
Grupo Oi SA gained 12.8 and 15.7 percent,
respectively. 
    Brazilian newspaper Folha de S. Paulo reported on Friday
that Mexico's America Movil SAB, Spain's Telefonica SA
 and Grupo Oi agreed to bid for TIM to then to break it
up among themselves. 
    Mexico's IPC stock index rallied for the fifth straight
session, with shares of America Movil up 1.2 percent.
    Shares in Mexican retailer Elektra extended a
rally for a seventh straight session and surged 12 percent on
Friday after the company settled a legal dispute over its
stock's weighting in the IPC index earlier in the week.
    Mexico's peso was little changed.
    Chilean markets were closed for a local holiday.

    Key Latin American stock indexes and currencies at 1735 GMT:
    
 Stock indexes                      daily %    YTD %
                                     change   change
                         Latest              
 MSCI Emerging Markets     1013.71     0.61     0.48
                                             
 MSCI LatAm               3,131.31     0.46    -2.62
                                             
 Brazil Bovespa          53,783.54     2.76     4.42
                                             
 Mexico IPC              45,006.44     0.91     5.33
                                             
 Chile IPSA               3,850.97        -     4.10
                                             
 Chile IGPA              18,842.72     0.89     3.38
                                             
 Argentina MerVal        10,845.10      2.9   101.17
                                             
 Colombia IGBC           13,236.30     0.28     1.26
                                             
 Peru IGRA               15,698.02    -0.83    -0.35
                                             
 Venezuela IBC            2,923.14     0.16     6.82
                                             
                                                    
 Currencies                         daily %    YTD %
                                     change   change
                            Latest           
 Brazil real                2.4559    -1.71    -4.04
                                             
 Mexico peso               13.4600    -0.10    -3.19
                                             
 Chile peso               577.0000     -       -8.82
                                             
 Colombia peso           2057.5000    -0.35    -6.10
                                             
 Peru sol                   2.9240    n/a      -4.48
                                             
 Argentina peso             8.5000     0.03   -23.62
 (interbank)                                 
                                             
 Argentina peso            14.1900     0.99   -29.53
 (parallel)                                  
                                             
 
 (Writing by Asher Levine in Rio de Janeiro; Editing by James
Dalgleish)