Brazil financial markets slip on Iraq war jitters

www.forbes.com Reuters, 02.10.03, 9:54 AM ET

SAO PAULO, Brazil, Feb 10 (Reuters) - Brazil's financial markets weakened in early trade on Monday amid growing worries a U.S. war with Iraq could stall the budding recovery of Latin America's largest economy. Traders said volume was low as investors held on to their cash awaiting a clear picture of how a possible war in Iraq will impact Brazil's sluggish economy. "This week is going to be lousy," said John Carioba, director at Indusval brokerage in Sao Paulo. "No one will want to take any decisions or invest because of the uncertainties," he said, adding that traders would be keen to see what United Nations weapons inspectors Hans Blix and Mohamed ElBaradei will report on Friday to the U.N. Security Council. The Sao Paulo Stock Exchange's benchmark Bovespa <.BVSP> index was down 0.3 percent at 10,348 points, putting it about 8 percent lower than where it started the year. Brazil's currency, the real , was also weaker by midday, trading 2 centavos lower at 3.61 per U.S. dollar. "Foreign factors, like the uncertainty about a war between the United States and Iraq, will continue to weigh on the market," said Jose Roberto Carreira, a currency trader at Novacao brokerage. He also noted traders would be on the lookout to see what kind of announcements President Luiz Inacio Lula da Silva makes after a Cabinet meeting this afternoon and how well the Central Bank manages to sell $900 million in dollar-linked notes. On Friday, it sold $1.35 billion in dollar-indexed notes, meaning it has already rolled over 54 percent of $2.5 billion coming due on Thursday. With international crude prices reaching 26-month highs, Brazil's state-run oil giant Petrobras <PETR4.SA> was up 0.22 percent at 45.10 reais. Investors are worried however that a U.S. war with Iraq could hurt Brazil's economy as foreigners curtail investments in emerging markets and the price of oil begins to drag on the economy. At the stock market, losses by the highly liquid telecommunications sector were leading the market into the red. Telesp Celular Participacoes <TSPP4.SA> was down 3.1 percent at 3.45 reais after it said it had raised its stake in its mobile phone unit Global Telecom to 100 percent and could have to make a negative provision on its earnings statement for the investment. Market bellwether Tele Norte Leste Participacoes, or Telemar <TNLP4.SA>, was down 0.4 percent at 24.95 reais. It accounts for about 14 percent of the Bovespa.