Brazil stocks fall despite new liquidity measures

Mon Oct 27, 2008 11:46am EDT
SAO PAULO, Oct 27 (Reuters) - Brazil's central bank took new steps to help the country's liquidity-starved financial system on Monday, boosting the currency against the dollar as global recession fears sent stocks lower for a fifth straight session.
The central bank said it had further eased reserve requirements on demand deposits, a step it said would add up to 6 billion reais ($2.6 billion) to the financial system.
It has already pumped about $30 billion into the foreign exchange market this month to ease the impact of the global financial crisis, in the form of dollar swaps, dollar repurchase agreements and selling some of its dollar reserves.
Brazil's real BRBY, which has lost about a third of its value against the strengthening dollar since early August, gained about 3.5 percent to 2.245 per dollar as the central bank sold another $1.25 billion in dollar repurchase agreements.
It will also offer $1.5 billion in a currency swap auction on Monday.
The stock market's Bovespa .BVSP index slid 3.48 percent to 30,384.64, after earlier touching a three-year low, following sharp slides in Asian and European markets and a weaker open on Wall Street.
The index has lost more than half its value so far this year, with losses accelerating sharply in the past month as foreign investors flee emerging markets and seek shelter from the financial crisis in dollars.
Market heavyweight Petrobras (PETR4.SA: Quote, Profile, Research, Stock Buzz) sank 5.9 percent to 19.20 reais as oil prices sank to a new 17-month low below $62 a barrel. For full story, see [ID:nSYD351781]
Vale (VALE5.SA: Quote, Profile, Research, Stock Buzz), one of the world's top three miners, fell 5.31 percent to 20.88 reais as concerns about the impact of tumbling commodity prices continued to weigh on its shares.
The country's battered banks were one of the few market sectors to avoid sharp losses on Monday.
Banco Itau (ITAU4.SA: Quote, Profile, Research, Stock Buzz) (ITU.N: Quote, Profile, Research, Stock Buzz), Brazil's second-largest private-sector bank, announced its third-quarter earnings results early in a bid to reassure investors.
It said its net profit jumped 14.6 percent in the third quarter thanks to strong growth in its credit portfolio, but saw loan growth in the country slowing sharply next year as the economy cools.
The country's largest private-sector bank group Banco Bradesco (BBDC4.SA: Quote, Profile, Research, Stock Buzz) (BBD.N: Quote, Profile, Research, Stock Buzz) reported a 3 percent increase in third-quarter net profit and said it is not exposed to risky foreign currency derivatives that have hit several firms.
Itau shares rose on the strong earnings report, climbing more than 3 percent in early afternoon trading, and last changed hands up 0.69 percent at 17.62 reais. Bradesco gave up early gains to trade down 1.05 percent at 19.80 reais.
Major lender Unibanco (UBBR11.SA: Quote, Profile, Research, Stock Buzz) (UBB.N: Quote, Profile, Research, Stock Buzz) also released its results earlier than scheduled last Friday to reassure investors as its shares plunged more than 22 percent at one point. It was trading at 10.4 reais on Monday, down 0.95 percent. (Reporting by Aluisio Alves and Jenifer Correa; Writing by Stuart Grudgings; editing by Gary Crosse)