Wednesday, March 22, 4:45 PM EST (Thomson Financial): Latin American
stocks retreated, as a surge in U.S. Treasury yields amid signs of strength in
the world's biggest economy fueled concerns about higher U.S. interest rates.
Mexico's bolsa was further pressured by profit taking despite upbeat local
inflation and trade data.
Brazil's Bovespa Index sank 376.74 points, or 1.00%. Mexico's benchmark
Bolsa Index tumbled 342.24 points, or 1.75%, while Argentina's Merval Index
inched up 1.03 points, or 0.06%.
Brazilian stocks fell as a jump in U.S. Treasury yields added to worries
that U.S. interest rates have further to rise. The rise in yields followed the
release of data showing a bigger-than-expected increase in U.S. existing home
sales in February. Higher U.S. interest rates often divert investment dollars
away from emerging markets like Brazil.
In local economic news, Brazil's official jobless rate rose to 10.1% in
February from 9.2% in January, the Brazilian Census Bureau (IBGE) reported.
The increase was attributed to an influx of people looking for work as well as
the dismissal of temporary workers hired for year-end sales. Despite the
increase, the rate was still the lowest February rate in recent years.
On the corporate front, a major investment bank said Petrobras could
increase investments by 20% to 30% at an upcoming revision of its five-year
strategic plan. The jump in spending would be driven by continued price
increases in the industry and the possible inclusion of a series of new
products, the bank said.
Meanwhile, telecom giant Telemar began the sale today of non-convertible
debentures worth US$1 billion. If the entire volume is sold, it will be the
largest debenture sale ever in Brazil for a non-financial company.
Miner CVRD was in focus after saying that the shipment of about 1 million
metric tons of Brazilian iron will be delayed during the first quarter of 2006
because of protests by Indian tribes at a key Amazon facility, Carajas.
In earnings news, electric power holding company Eletrobras reported a
2005 net profit of 975 million reais, down from 1.29 billion reais the year
before, as results were hurt by the real's strength.
Mexican shares turned definitively lower today, following a string of
consecutive gains that led to repeated all-time highs for the IPC index.
Investors are looking forward to tomorrow's central bank meeting on monetary
policy, in which the overnight rate is expected to be cut to 7.25% from 7.5%.
U.S. equities also dropped, partly due to inflation and interest rate fears
following strong economic reports.
On the economic front, the Bank of Mexico said that consumer prices rose a
much smaller-than-expected 0.04% during the first half of March amid a drop in
prices of chicken, tomatoes and other fresh produce. Analysts were looking for
a 0.16% advance in prices, on average. The most recent reading reduces annual
inflation to 3.4% from 3.75% at the end of February. Core inflation, which
excludes fresh fruit and vegetables, energy and education costs, jumped 0.23%
to an annual 2.93%.
Elsewhere, the National Statistics Institute, or Inegi, reported that
Mexico posted a second-straight monthly trade surplus, thanks to high oil
prices and growth in vehicle exports. For February, the trade surplus arrived
at US$461 million, despite an expected deficit by analysts.
Cement maker Cemex announced late last night this it will spend more than
47 million euros to build a new cement mill and dry mortar production plant at
the Port of Cartagena in Spain by the first quarter of 2008. The facilities
would have a production capacity of nearly 1 million tons of cement and
200,000 tons of dry mortar per year.
Standard & Poor's Ratings Services reduced its long-term local and foreign
currency corporate credit ratings assigned to Vitro to B- from B.
Argentine shares barely moved on the day on low trading volume. Investors
are not taking kindly to the government's recent repeal of water firm Aguas
Argentinas' contract. Meanwhile, a US$500 million sovereign bond auction
yesterday reduced market liquidity.
-- 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
james.sang@tfn.com or call 646.822.6233. For more information about Thomson
Financial, please visit our web site at http://www.thomsonfinancial.com.
SOURCE Thomson Financial Corporate Group
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