BRAZIL: Stocks Fall As Risk Aversion Grows

(RTTNews) - Ibovespa, the benchmark stock market index in Brazil, fell for the second consecutive session, by 0.65% to 83,081.88 points Friday as risk aversion abroad and doubts about the credibility of the country's central bank weighed on investor sentiment.

Ibovespa posted a 2.51% weekly decline, with most of the decrease recorded yesterday, when the index fell 3.37% - the largest drop in one year.

Codepe Corretora chief economist, Jose Costa, noted that Ibovespa gave back a few losses at the end of the session on potential bargain-hunting, but added that higher interest rates in U.S. Treasury notes and the dollar strength are worrisome and still weigh.

"A lot happened in the last two days. It is only natural that we have a correction. It could be that the market thought that this is not the end of the world, but that picture of stability that we had a few months before changed a little," he added.

Investors are also having a hard time at digesting the central bank's decision to keep the Brazilian benchmark interest rates unchanged on Wednesday. Most investors thought that the monetary authority would decide on a new cut.

Some market participants also believe that the central bank should have been more robust in its foreign-exchange intervention to calm markets down. The locally traded U.S. dollar rose 1.05%, to R$ 3.7390.

Analysts expect investors to remain cautious next week. According to Andre Perfeito, the chief economist at Spinelli Corretora, "the search for liquidity in the next few weeks is inevitable," and investors will seek safer assets.