Short-selling has jumped to twice the levels before the 2008 market crash on concern Brazil’s move to cut borrowing costs will add to the fastest inflation since 2005, while slowing global growth may hurt demand for commodities. An accord to stem Europe’s debt crisis helped the Bovespa index emerge from a yearlong bear market yesterday. Currency declines had made stocks cheaper in dollar terms, luring foreign investors amid the lowest valuations in two years.
Brazil’s benchmark equity gauge is still down 14 percent this year through yesterday after economists cut their domestic economic expansion forecasts amid the global slowdown. That compares to a 2.1 percent gain for the Standard & Poor’s 500 Index in that period.
The bull-market rally “does not indicate a sustained upward move by Brazil,” said Komal Sri-Kumar, chief global strategist in Los Angeles at TCW Group Inc., which oversees about $120 billion. “There is a lot of optimism — in my opinion not completely justified — on the solution to Europe’s debt crisis. I wouldn’t get overly excited.”
Source: Business Week