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Financial News: BRAZIL: Ibovespa Falls After House Vote On Temer,

BRAZIL: Ibovespa Falls After House Vote On Temer, Rate Cut And Balances

10/26/2017 - 20:30:00 (RTTNews)

(RTTNews) - Ibovespa, the benchmark stock index in Brazil, fell 1.01% to 75,896.35 points Thursday, while investors evaluate the consequences of the score of the vote in the House of Representatives in which the President Michel Temer was shielded from prosecution.

Also weighing was speculation on the interest rate cut pace in 2018 by the Brazilian central bank and corporate results such as Vale's, which came below analysts expectations.

On Wednesday, Brazil's House of Representatives once again shielded the President Michel Temer and two of his ministers from being prosecuted on corruption allegations in a 251-233 vote. As a consequence, Temer and the ministers Eliseu Padilha and Moreira Franco only could be prosecuted for the alleged crimes in 2019, after their terms are over.

Despite winning the vote, Temer amassed 12 fewer votes than in the vote in which he was shielded by his allies for the first time. The score was closely watched by market players. According to analysts, the vote score suggests that Temer will face more hurdles to advance with the pension reform in the Congress.

For Alvaro Bandeira, the chief economist at Home Broker Modalmais, the government is expected to promote a pension reform at least with some points considered important by the market, such as raising the minimum age for retirement.

Also, although central bank's decision came as expected, with a cut of 0.75 percentage point (pp) in its benchmark interest rate, some analysts noted that the monetary authority's statement raised doubts about the continuity of rate cuts in 2018.

For Bandeira, Vale's losses (-2.53%) also had great weight on the Ibovespa.

"Despite having had a very good balance sheet, the market expected a better result from Vale," said the economist.

Other companies that also released results today fell, such as Ambev (-0.80%) and Santander (-3.40%).

For Friday, new corporate balance sheets may affect the Ibovespa, such as those of CCR, Estácio, Suzano, Usiminas, Embraer, among others. Also, investors will keep an eye on the pension reform negotiations in Congress.

The locally traded U.S. dollar closed up 1.2%, at R$ 3,286, returning to the highest level against the Brazilian real since July. The greenback rose due to the tight score in the House vote that shielded Temer from prosecution and the maintenance of the purchase of assets by the European Central Bank (ECB).

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