analysis today 03-07-08

Bovespa May Fall to 60,000 as Commodities Drop, Citigroup Says

By Ferniawan Rese

July 2 (Bloomberg) -- Brazil's Bovespa stock index may drop to 60,000 on further declines in commodity prices, according to Citigroup Inc. strategists.

Citigroup's Bovespa forecast represents a 7.7 percent cut from its previous estimate of 65,000 and a 1.8 percent decline from today's close of 61,106.22.

``By far the biggest long-term risk for Latin American equities is a collapse in commodity prices,'' Citigroup strategists including Geoffrey Dennis wrote in a note to clients. ``Brazil -- with over 60 percent of the index being cyclicals -- would be badly hit and, under such circumstances would likely fall well below the 60,000 level.''

The 19 commodities in the Reuters/Jefferies CRB Index jumped 29 percent through June 30, the most since 1973 and more than any second-half gain in at least five decades, data compiled by Bloomberg show. The rally increased concerns that a correction in commodities prices may be due.

``The risk of such a fall is small near-term as the dollar stays weak,'' Dennis wrote. ``The timing of a major correction in commodity prices is more likely to be into year-end as the U.S. economy and the dollar finally rebound.''

Dennis also cut his forecast for Mexico's Bolsa by 6.6 percent to 28,000 from 30,000. The New York-based strategist kept his ``overweight'' rating for both Mexico and Brazil, though he favors Mexican stocks over Brazilian shares.

Any ``decent'' rebound for Brazilian stocks will depend on improving global conditions and clearer evidence of how high local inflation and interest rates will be, Dennis said.

``We continue to fear an above-consensus rate peak.''

The Bovespa has lost 4.4 percent this year, compared with a 3.4 percent drop for the Bolsa and a 15 percent decline in the MSCI Emerging Markets Index.

forex	target buy	target sell	close target buy	close target sell	profit	result
EUR/USD	-	1,5701	-	1,5691	10 pips	benefit
USD/JPY	106,7	-	106,85	-	15 pips
GBP/USD	-	19817	-	19800	17 pips
USD/CHF	10276	-	10286	-	10 pips
USD/CAD	-	10213	-	10200	13 pips
AUD /USD	-	9602	-	9590	12 pips
NZD/USD	7555	-	7565	-	10 pips
EUR/JPY	-	16743	-	16730	13 pips
EUR/GBP	7920	-	7935	-	15 pips
EUR/CHF	16100	-	1615	-	15 pips
GBP/JPY	-	-	-	-	-	none