Thursday, March 9, 4:45 PM EST (Thomson Financial): Latin American stocks
fell again today, as ongoing concerns over rising U.S. Treasury yields
overshadowed a move last night by Brazil's central bank to cut local interest
rates.
Brazil's Bovespa Index dropped 976.81 points, or 2.62%. Mexico's benchmark
Bolsa Index fell 88.25 points, or 0.48%, while Argentina's Merval Index lost
11.30 points, or 0.64%.
Brazilian stocks tumbled, extending a recent sell-off, amid continued
concerns about the recent rise in U.S. Treasury yields, which has been widely
viewed as reflecting expectations of further U.S. interest-rate hikes to
contain inflation. Higher U.S. rates tend to divert investment flows away from
emerging markets like Brazil and into U.S. fixed-income investments.
The Bovespa was initially higher today, however, as investors were cheered
by news that Brazil's central bank late yesterday cut the base Selic interest
rate by 75 basis points to 16.5%, as expected. It was the sixth consecutive
reduction aimed at fueling economic activity. Also, in its accompanying
statement, the bank omitted previous warnings about possible inflationary
pressures. Further adding to hopes for deeper cuts at the April meeting, three
of the nine central bank directors voted yesterday for a cut equal to a full
percentage point.
Reinforcing hopes the central bank has more room to cut rates, the IBGE
reported that Brazil's industrial production fell 1.3% in January from
December. Industrial output rose 3.2% in January from the same month a year
ago.
On the corporate front, Brazil's biggest telecom carrier Telemar said its
fourth-quarter net profit rose to 416 million reais from 293 million reais a
year earlier, helped by an expansion of the company's mobile and broadband
services.
Technology group Totvs SA debuted on the Bovespa today. The company raised
400 million reais from the sale of a total of 12.5 million common shares,
priced at 32.00 reais per share.
Elsewhere, Mexico was unable to hold on to early market gains, and instead
opted to follow its recent losing trend. Emerging markets in general have been
under pressure recently, as concerns have been brewing regarding rising U.S.
interest rates and the potential subsequent impact on global liquidity.
In major economic news, the Bank of Mexico said that the Consumer Price
Index rose 0.15% in February, growing at a slower pace as energy and
agricultural prices eased. The latest result brought the annual rate of
inflation down to 3.75% from 3.94% at the end of January.
Also, the Finance Ministry reported that Mexico's total exports rose 35.9%
in January from a year ago to US$19.21 billion, while imports advanced 22.9%
to US$18.76 billion. The trade surplus was upwardly revised in January to
US$444 million from US$398 million.
Argentina followed the broad regional trend and finished in the red, while
volume was low. Telecom Argentina, which is scheduled to announce financial
results tonight, advanced on word it is moving forward with rate re-
negotiations with the government.
On the economic front, Di Tella University said that consumer confidence
leapt 6.5% in March from last month and advanced 2.5% from a year ago. The
most recent result brought the consumer confidence indicator up to an all-time
high of 59.9 points.
Turning to airlines, APLA and APTA, or unions representing pilots and
mechanics, respectively, launched a 24-hour strike against Aerolineas
Argentinas after the firm rejected the workers salary proposals.
-- Paul.Davee@thomson.com; Thomson Financial Corporate Services
This is Thomson Financial Corporate Services Latin American Commentary.
The information herein is believed to be true and accurate, we take no
responsibility for inaccurate information and reserve the right to update our
reports. If you have any questions please e-mail James Sang at
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SOURCE Thomson Financial Corporate Group
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