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segunda-feira, março 16, 2009

Our Mood for Today

Good Morning,

We could mention at least three main reasons for the good start of this
week in terms of market performance. The first one is regarding the G20
meeting and the coordinated efforts or intentions to deal together and
clean up clean up the toxic assets that helped trigger the financial crisis
and led banks to rack up more than USD 1.2 trillion in losses.

The coordination is really desirable and necessary. The second one is Mr.
Bernanke's interview yesterday night pointing that with a future Financial
System stabilization, the recession could end during 2009 (not sure about
this...). And the third one is a continuity of Banks recovery now with the
help of Barclays. Good news!

Today, President Lula, the Finance minister Guido Mantega and the Central
Bank President Henrique Meirelles will speak to investors in New York. One
of the great investor's concerns is regarding Government Expenses. Mr. Lula
needs to reassure investors that he will keep spending in check as growth
in Brazil's economy diminish dramatically due to current challenging
environment. It's scheduled for the end of this week (20th) the
announcement of Government's Revision of 2009 budget. Unfortunately as
mentioned several times in our moods, Mr. Lula didn't get advantage of a
benign scenario to promote some reforms around here and instead just
increased the current expenses. Now, we must check what will be their
answer for these difficult times. The only comfort for them is that a lot
of countries are now currently increasing their fiscal deficits on an
anti-cyclical policy to fulfill the lack of private investments and that
should also be the case of Brazil... Let's keep our eyes open!

March IGP-10 fell 0.31%, we expected a drop of 0.40%. In February the index
rose 0.54%. This deceleration was partly due to reversal of last month's
3.25% rise in farm prices to -1.49%, thanks to falling prices of soybeans,
maize and beef cattle. As for industrial prices, cooling processed foods
was partly offset by a slower fall in chemicals and pulp. The retail
component (IPC) was relieved by a fall in prices of some items of fresh
produce. Pressure from the construction industry component (INCC) was
weaker again because of less variation in labor costs.

FGV has also announced the second four-week moving average of the IPC-S for
March. This index rose 0.37%, in line with our forecast (0.36%) and almost
unchanged compared with a week earlier (0.35%). Food prices remained under
pressure owing mainly to fruit and vegetables, but this was offset by
dilution of the recent train and metro fare hikes, and continuation of the
seasonal fall in clothing prices.

Analyzing each market now:

- Currency Market: We expect a continuity of the BRL appreciation during
today's trading session.

- Interest Rate Market: We uphold our call and think the best option is to
be LONG on the short term (JUN and JUL 09 DI contract) to get advantage of
future downside movements of the CB.

- Stock Exchange Market: Despite the good momentum abroad we expect a flat
market during today's trading session.

- Sovereign and Corporate Debt Market: We expect a flat market during
today's trading session.

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