Sell-off on Brazil debt

Press, 25 February 1987, Page 39

Sell-off on Brazil debt

NZPA-Reuter New York A sharp drop in bank shares provided the catalyst for a general sell-off on Wall Street on Monday (early yesterday New Zealand time), sparked by worries over Brazil’s suspension of debt payments to foreign banks. Declining shares led advances by six to one in heavy tradiing, and the Dow Jones Industrial Average was down 24 points at 2211 shortly after midday. The Dow index was down as much as 44 points earlier. Concern was heightened that banks may have to write off some portion of their loans to Brazil after Brasilia suspended interest payments on SUS6B billion of debt to foreign banks.

The market’s weakness began in the money centre bank segment and

then fanned out into the market as a whole. Analysts said the market was primed for a correction after the recent liecord-setting rally. The I|ow average is up more ithan 300 points so far this year. Citicorp, the nation’s larged banking company, had the biggest loss of any financial concern, falling 375 c to 5450. The bank shares, which eased slightly on Friday as some analysts began to warn that the Brazil situation was deteriorating, were hit by heavy selling from the start of trading this week.

Analysts said the situation was serious, but that there was still a chance for a negotiated settlement with Brazil which would enable banks to avoid massive loan writeoffs.