MARKET WATCH: New recession worries slam businesses

Rating
+1
Total:	1

SÃO PAULO, 11/19/08 - Recession perspectives and bad corporate news hurt the improvement of global markets. The worries about the U.S. automotive sector left investors apprehensive. Last Tuesday, executives at three large carmakers went to the American Congress to say that their companies are on the verge of collapse and requested the approval of an emergency package for the sector worth US$25 million.

Basf announced measures to fight the sharp fall in demand due to the economic crisis. The company will temporarily interrupt the operations at 80 plants worldwide and reduce the production in some 100 industrial units.

The American real estate sector continues to indicate slowdown. New homes building fell 4.5 in October, as building licenses declined 12%, down to the lowest level in 48 years.

The U.S. Consumer Price Index (CPI) fell 1% last month, after having remained unchanged in September.

The minute of the meeting held in October 29 by the Federal Open Market Committee (Fomc) of the U.S. Federal Reserve (Fed) indicates that the American economy will decline until the middle of 2009. The U.S. lending rate was cut down to 1% annually.

Volatility prevailed in the Brazilian stock exchange today. Recession fears led the BM&FBovespa index to close down for the fourth consecutive session. The Brazilian exchange lost 2.02% to 33,404 points. Besides, the local holiday in São Paulo (Black Awareness) on November 20 also stimulated investors to change their positions. The trading volume continued low, closing at R$2.89 billion.

Dollar rates climbed for the third consecutive day in Brazil, hitting R$2.40. In the end of the day, dollar prices closed up 2.58% to R$2.387.

Amid concerns about the slowdown of the Brazilian economy, market analysts increased their bets on the maintenance of the lending rate (Selic) at 13.75% a year until the second quarter of 2009.At the BM&FBovespa, future interest rates on Interfinancial Deposit (DI) contracts are already pointing to this trend.

ID contracts reversed trends at the opening and pointed upward due to the hike in dollar prices and international uncertainty. January 2010 DIs jumped from 14.86% to 14.91% annually.

According to the Brazilian Institute of Geography and Statistics (IBGE), the country's unemployment rate reached 7.5% in October, down from 7.6% in the previous month. The result indicates that, until October, the financial crisis had not hurt the country's labor market.

(newsroom/cferreira - InvestNews)