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Brazil shares end off 2.1 percent with eye to US rates

SAO PAULO: Brazilian shares slumped for the third session in a row on Monday amid deepening concerns over a possible increase in U.S. interest rates, which could slow investments in emerging markets like Brazil, traders said.

Sao Paulo's benchmark Bovespa stock index closed down 2.1 percent at 16,388 points, despite a solid rebound on Wall Street, as investors in Brazil looked ahead to the chance that the US Federal Reserve will aggressively raise rates after a two-day policy meeting that ends Wednesday.

"Nobody here wants to be surprised by bad news from the Fed," said Helio Ozaki, a fund manager at Finambras brokerage in Sao Paulo. "People are taking profits ahead of the meeting rather than remain vulnerable."

US analysts said a modest increase of 25 basis points in a benchmark short-term rate was already factored into the prices of US financial issues, which led the Dow Jones industrial average to a 1.88 percent gain in late trading. The chances of a 50-point increase are considered slim.

Monday's losses in Sao Paulo further eroded gains that took the Bovespa to a record high in the first half of January and brought the month's total decline to 4.2 percent.

Bradesco, Brazil's largest commercial bank, led the retreat as the new trading week got under way.

Bradesco closed off 7 percent at 14.61 reais after reporting net income last year rose 9 percent -- not much higher than inflation. The company said Brazil's steep currency devaluation in early 1999 and loan-loss provisions took a chunk out of profits.

Brazilian blue chips, such as Eletrobras, and telephone shares fell amid a wave of profit-taking after leading the market higher in the first half of the month. Eletrobras, the state electricity holding company ended down 3.2 percent at 34.85 reais.

Telebras receipts -- a basket of telephone issues that accounts for almost 40 percent of trade on the Bovespa -- fell 2.3 percent to end at 229.50 reais. Among individual phone stocks, Telesp closed down 3.6 percent at 51 reais and Tele Norte Leste ended off 4.3 percent at 44.21 reais.

Embraer, the aircraft maker that is Brazil's No. 1 exporter, bucked the broad market decline, ending up 3.9 percent at 8.10 reais after announced a number of key orders last week.

Overall turnover was weaker than average, with 800 million reais changing hands, compared with daily average volume of 980 million reais in December.-Reuters