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Strategies & Market Trends : Telebras (TBH) & Brazil -- Ignore unavailable to you. Want to Upgrade?

To: wl9839 who wrote (21135)	7/18/2000 3:01:55 PM
From: SeachRE	Respond to of 22640

The Internet will give Brazil telecoms a nice shot in the arm, IMO. The system in Brazil favors these companies, not so much the Internet providers.

To: wl9839 who wrote (21135)	7/20/2000 8:15:16 AM
From: wl9839	Read Replies (1) \| Respond to of 22640

Brazilian Stocks, Bonds May Rise on Surprise Rate Cut Sao Paulo, July 20 (Bloomberg) -- Brazilian stocks and bonds may rise after the central bank unexpectedly cut interest rates for a third time in a month to boost an economic recovery. The bank cut its benchmark overnight rate to 16.5 percent from 17 percent, while shifting to a ``neutral'' bias on future moves. This indicates it doesn't intend to cut rates before its next policy meeting Aug. 23. The widely traded ``C'' bond rose 0.42 percent in early trading to 74.062, pushing its yield down to 13.31 percent. Stocks may also rise as lower corporate borrowing costs boost company earnings. The central bank cut the interest rate on expectations of a lower inflation rate this year and next, said Luiz Fernando Figueiredo, director of the bank's monetary policy committee. Only three of 22 economists in a Bloomberg survey had forecast a rate cut. With today's cut, the central bank has lowered rates by 200 basis points within a month, and slashed rates from a high of 45 percent in March 1999. While the cut could boost consumer spending, which would help economic growth, the bank is risking a worsening of inflation that is expected to accelerate because of utility rate increases and surging oil prices. Brazil's benchmark IPCA inflation rate stood at 0.23 percent in June. Other indexes point to an acceleration. Consumer prices in Sao Paulo rose 0.51 percent in the month through July 14, after rising 0.2 percent in the month-earlier period. Brazil is expected to easily meet its inflation target of 6 percent for the year, with the inflation rate rising just 1.73 percent for the first half of the year. Inflation Rate Rises Recent frosts in southern Brazil could cause food prices to rise, causing inflation to quicken. Also oil prices might not fall further, even after the Organization of Petroleum Exporting Countries decided to crank up production. Brazil could raise gasoline prices for a third time this year if petroleum prices don't fall. Crude oil soared above $32 a barrel again after OPEC's president said a drop in an index price the group uses to regulate supply means the producers no longer need to boost output. The bank also is watching U.S. interest rates, as another raise there could drain money away from Brazil and investors seek higher returns abroad, weakening the currency. The U.S. Federal Reserve will meet Aug. 22 to decide whether to raise its benchmark rate from 6.5 percent. Weak Demand Companies such as carmaker Volkswagen AG welcome the rate cut, as it may lead more consumers to spend more and hasten the pace of a six-month-old economic recovery. Brazil's economic expansion in the last two quarters was mostly driven by the export of manufactured goods. Consumers, who account for three-quarters of demand in the country's economy, haven't contributed much to the recovery as wages stalled and unemployment remains high. For manufacturers producing for the home market, such as the Brazilian unit of carmaker Volkswagen AG, any rate cut helps, as soaring interest rates last year cut demand for vehicles in the country's $28 billion auto market. -------------------------------------------------------------------------------- © Copyright 2000, Bloomberg L.P. All Rights Reserved.