Brazil stocks up on Congress vote, currency steady

Reuters, 04.03.03, 10:13 AM ET By Todd Benson SAO PAULO, Brazil, April 3 (Reuters) - Brazil's stock market trotted higher early on Thursday, riding a fresh wave of optimism after Congress paved the way for Central Bank autonomy. The Brazilian currency, however, drifted sideways to lower in thin trade, giving up early gains as investors awaited a Central Bank debt auction scheduled for later in the day. The real , which gained nearly 4 percent over the past four sessions, was down almost 1 centavo at 3.269 per dollar. Stocks, meanwhile, headed higher for the third straight day, lifting the Sao Paulo Stock Exchange's benchmark Bovespa <.BVSP> index 0.53 percent to 11,935.3, within spitting distance of the psychologically important 12,000-point mark. The gains came after an overwhelming 442 congressmen gave the nod late on Wednesday to a constitutional amendment that allows for future legislation giving the Central Bank autonomy from the executive branch. Only 13 vote against the bill, while 17 abstained. Though markets had anticipated the outcome, the resounding vote count fueled hopes that the new government of President Luiz Inacio Lula da Silva is gaining the political clout needed to push through other tough economic reforms, like overhauling the country's cumbersome tax and pension regimes. "This shows that when the executive puts all of its forces to muster support in Congress, it can get its way," said Marcelo Salomon, chief economist at ING Bank in Sao Paulo. "It's a good start, but it doesn't necessarily mean the government will easily get such a large amount of votes for other reforms," he added. "There's still a lot of hard political work to be done down the line." Investors also had a fresh batch of good economic news to chew on. Data released on Thursday showed that inflation in Sao Paulo, Brazil's richest and most populous city, dropped sharply in March to 0.67 percent from 1.61 percent in February. The numbers were the latest to confirm that inflation in Latin America's largest economy is finally losing steam, prompting many in the market to speculate that an interest rate cut may be in store later this month. In the stock market, the real's surge of late continued to benefit companies with hefty debt loads in dollars, such as long-distance carrier Embratel Participacoes <EBTP4.SA>. Stock in Embratel, the Brazilian unit of bankrupt telephone giant WorldCom Inc. <WCOEQ.PK>, was up 1.6 percent at 3.82 reais in early trading. Brazil's leading cable company Net Servicos de Comunicacao <PLIM4.SA>, another debt-ridden firm, jumped 6.67 percent to 0.32 reais in modest trade, adding on to a 7 percent surge on Wednesday. On the downside, bellwether stock Tele Norte Leste Participacoes, or Telemar <TNLP4.SA>, slipped 0.33 percent to 29.95 reais. The phone company is the heaviest weighted stock on the Bovespa, accounting for 14 percent of the index.