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Brazilian shares end sharply up on US rates relief

SAO PAULO: Brazilian shares ended sharply higher on Thursday as investors breathed a sigh of relief that the US Federal Reserve's rates hike was within expectations and not more aggressive, traders said.

Sao Paulo's benchmark Bovespa index surged 3.5 percent to close at 17,457 points, extending Wednesday's gains after the Fed raised its key interest rate by an expected 25 basis points.

"A lot of people deep down inside were afraid the Fed would actually raise rates 50 basis points, so the news was a relief," said Jorge Simino, a fund manager at Unibanco in Sao Paulo.

The confirmation of a modest rate increase soothed investors worried that foreign capital flows would be diverted by tempting interest rates in the United States.

Shares of banks and telephone companies which had led the Bovespa's rise in early January resumed their upward climb Thursday. Both sectors are expected to benefit from the growing Internet business in Brazil.

Embratel, a long-distance carrier that has the biggest Internet backbone in Brazil, closed up 9.2 percent at 46.20 reais while Itau bank rose 5.2 percent to end at 139 reais.

Banks are expected to be important players in the electronic commerce industry.

"Stocks are returning to normal and those that were leading are resuming their lead," Simino said.

Trading volume was also back to normal, with 1.11 billion reais in trades, compared with average daily volume of 1.05 billion reais in January. Trading had dropped off in recent sessions as investors awaited the result of the Fed meeting.

Telesp Celular Par closed up 5.9 percent at 28.80 reais after releasing its 1999 financial results which showed strong growth in revenues, despite a drop in earnings due to an accounting calculation.

Pay TV operator Globocabo rose for a second day after options on its American Depositary Receipts were listed in Chicago -- a move which should make shares more liquid, traders said. Shares rose 4.9 percent to 4.29 reais.

The Bovespa is up 6.5 percent so far this month and 2.1 percent so far in 2000. -Reuters