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terça-feira, novembro 10, 2009

Our Mood for Today

Good Morning!

German Investor Confidence Declined more than economists forecasted for November and that is one of the reasons for the correction movement current in place. Also there is some profit taking movement affecting the commodities markets and that should impact especially our stock market (commodities driven). Nevertheless these profit taking movements have been used as good buy opportunities and considering investors current approach on a clearly risky searching that trend should continue for a while...

In here just want to make some comments regarding politics. On the last couple of days finally we could perceive some important movements of the opposition parties trying to establish the differences and idiosyncrasies of the Government and PT. Both articles were presented on the newspaper O Estado de São Paulo. The first one was written by the Ex President Fernando Henrique Cardoso presenting his concerns for what he thinks is a kind of Peron and Chavez practices on current Government initiatives, something that is clearly against democracy. Next one was an interesting article written by the Ex finance Minister Pedro Malan where he express his concerns regarding some Government Initiatives that are just focused on the short term period of time and are not taking into consideration the Economy Evolution with a long term perspective bias. Accordingly with his view the Government manages his approaches and measures considering mainly the 2010 Elections. Certainly not a good way of managing our Nation because Governments change (at least this is usual) but the country and institutions continue. I think these movements were important and the PT´s and Lula's comments regarding them, especially the one of Mr. Cardoso, corroborate the view that they were really at the point! Yesterday it was current Minas Gerais Governor; Aécio Neves that also presented his concerns about the way things are going on the political world... The 2010 Elections are still far away but the battle seems to be starting... Let's keep our eyes open and pray for the good!

The first four-week moving average of Fipe's IPC for November rose 0.31%, value above our estimate (0.25%).In October, the index had registered an increase of 0.25%. The main source of upside pressure was ethanol, owing to adverse weather that has reduced sugarcane production globally. Besides, the weaker deflation of some non manufactured items contributed to the minor deflation of the food prices compared with the previous week.

IBGE publishes its monthly survey of employment and pay in industry (PIMES), also for September. Thanks to the recovery driven by domestic demand, employment is now rising again in the sector, after a period of adjustment to the drop in activity due to the global crisis. We expect the report to show a continuation of the trend, in line with the August report's reading of 0.3% growth in employment.

Analyzing each market now:

- Currency Market: In fact yesterday the BRL surpassed for a few moments the 1.70 support during the trading session. Today the concerns regarding new Government Measures affecting the currency market has again increased volatility. Despite still confident about the BRL performance we should adopt a more cautious stance during the day... Let's buy BRL, but also let's keep our eyes open!

- Interest Rate Market: We uphold our call and recommend the strategy of paying and receiving the JAN11XJAN12 DI Contracts around here...

- Stock Exchange Market: Despite all the volatility increase and some profit taking movements the FUNDAMENTALS should prevail and the stock picking strategy together with the BUY in the DIPS one would guarantee good returns going forward. Support /resistance levels are 64500 / 66500.

- Sovereign and Corporate Debt Market: We uphold our call and think that the HG Brazilian Names will continue to have a good support in terms of investor's appetite. However that's not the case for the HY names at least until the end of the year... Brazil 5Y CDS is trading around 124 bps (+3bps). BR 40 is trading around 153 SOT (+3bps).

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