Petroleo Brasileiro S.A. - Petrobras (PBR)

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Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR) and Brazilian Banks Under Pressure: Itau Unibanco Holding SA (ADR) (NYSE:ITUB), Banco Bradesco SA (ADR) (NYSE:BBD)


by Chad Roskin / September 26, 2014


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Shares of Brazilian banks and other stocks such as Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR) closed lower Thursday as the Ibovespa (IBOV) hit a six-week low after data showing unemployment in Brazil exceeded estimates dimmed the outlook for companies that depend on domestic demand.

The unemployment rate rose to 5 percent in August, the national bureau of statistics reported today. That’s above the median estimate of 4.9 percent among 19 economists surveyed by Bloomberg.

The unemployment rate in Rio de Janeiro state, home to 16.5 million people, is just 3%. It’s never been so low. It’s almost as if Brazil has developed some sort of China-style full-employment policy. On a national level, unemployment is just 5%. By comparison, China’s official unemployment rate is a little over 4%.

“All data about the Brazilian economy released lately show the situation is very negative,” Fernando Goes, an analyst at the brokerage firm Clear Corretora, said in a phone interview from Sao Paulo. “Those numbers are the reason for investors to want a change in the government. That’s why the trends in the market now are so linked to election polls. We should see more volatility on the way in the next few days.”

The headline unemployment is quite low but I don’t know if the measurement of it is art or science. The trend in employment growth is just as important and that is flat from a year ago,” says Bill Adams, senior international economist for PNC Financial Services Group in Pittsburgh. “It’s probably asking too much to treat these month to month numbers as fact. They’re useful summary statistics, but their ability to capture what is going on in the labor market is limited.”

Brazil’s economy is slowing. It entered into a technical recession in the second quarter, defined by back-to-back quarters of economic contraction. China’s economy is slowing, with Barclays Capital economist Jian Chang in Hong Kong expecting Beijing to lower its official GDP target to 7% instead of 7.5%. Yet, miraculously, unemployment is just 4.1%, unchanged year over year.

Among banks, Itau Unibanco Holding SA (ADR) (NYSE:ITUB), Banco Santander Brasil SA (ADR) (NYSE:BSBR) and Banco Bradesco SA (ADR) (NYSE:BBD) each saw noteworthy decline.

Elsewhere, Cosan Limited(USA) (NYSE:CZZ), TIM Participacoes SA (ADR) (NYSE:TSU) and Companhia Energetica Minas Gerais (ADR) (NYSE:CIG) followed selloff in Brazilian as well as U.S. stocks

http://www.marketsemerging.com/petroleo-brasileiro-petrobras-sa-adr-nysepbr-and-brazilian-banks-under-pressure-itau-unibanco-holding-sa-adr-nyseitub-banco-bradesco-sa-adr-nysebbd/1713659/