Tuesday, March 28, 4:45 PM EST (Thomson Financial): Latin American stocks
tumbled, with Brazilian shares posting the biggest losses, amid concerns about
the outlook for U.S. interest rates and uncertainty over the direction of the
new Brazilian finance minister's economic policies.
Brazil's Bovespa Index dropped 958.85 points, or 2.55%. Mexico's benchmark
Bolsa Index fell 296.34 points, or 1.54%, while Argentina's Merval Index
slipped 20.11 points, or 1.11%.
Brazilian stocks sank amid uncertainty about the future of the new
Brazilian finance minister's economic policies. After week's of repeated
corruption allegations, Antonio Palocci stepped down from his post as finance
minister, and was replaced by Guido Mantega, former president of state-run
Bank of National Development, or BNDES. Deputy Murilo Portugal, one of the
names circulated to replace Palocci, also resigned. The market may have been
pressured by uncertainty over whether Mantega, who is viewed as a pro-growth
advocate, will continue Palocci's orthodox economic policies aimed at taming
inflation. Mantega said in a news conference today that an acceleration of the
central-bank's current interest-rate cutting cycle "would not be a sin."
The Bovespa may have also been dragged under by somewhat hawkish comments
from the U.S. Federal Reserve. The Fed raised U.S. interest rates by a quarter
point to 4.75%, as widely expected, and left the door open for further rate
increases. The central bank noted that economic growth had rebounded strongly
in the current quarter from the previous one, but that it appears likely to
moderate to a more sustainable pace. Although the run-up in energy and other
commodities prices has had only a modest effect on core inflation, possible
increases in resource utilization may eventually add to inflation pressure. As
a result, the Fed believes "some further policy firming may be needed," a
statement that disappointed some investors, who had hoped for signs the bank
may soon end its rate tightening cycle.
In local economic news, Brazil's government posted a primary budget
surplus in February of 4.729 billion reals, up from January's surplus of 3.07
billion reals.
Meanwhile, the Fipe research foundation said the Sao Paulo consumer price
index rose 0.24% in the four weeks ended March 23, compared with a rise of
0.26% in the four weeks ended March 15, signaling a slight slowdown in the
city's consumer inflation.
On the corporate front, steel-maker CSN reported a fourth-quarter net
profit of 352 million reals, down from 531 million reals a year earlier.
An influential investment bank started coverage of Braskem at
"underperform," saying the company has "a solid management team and world-
class disclosure and corporate governance standards" but that industry
fundamentals will continue to deteriorate over the next few years.
Mexican shares moved lower on the day, alongside U.S. market declines,
following indications from the U.S. Federal Reserve that further rate hikes
are likely. Also dampening broader regional sentiment was the resignation of
Brazilian Finance Minister Antonio Palocci.
In corporate reports, billionaire Carlos Slim and his family are
transferring a 29% stake in Ideal, an infrastructure holding firm, to the
Carso Foundation, which is affiliated with the Slim family.
Elsewhere, a major investment bank upgraded Coca-Cola Femsa SA to "buy"
from "neutral," due to the bottler's attractive demographics, potential
synergies and "independent corporate governance."
A separate investment bank raised its rating on bank Grupo Financiero
Banorte to "overweight" from "equal weight" due to valuation and "solid
fundamentals for Mexican banks."
Grupo Mexico's shares declined, as a strike at the firm's La Caridad
copper mine entered its fifth day. The National Mining and Metal Workers Union
said that labor authorities are expected to end a dispute over union
leadership soon.
Argentine issues followed the broader region lower amid U.S. interest rate
hike concerns. Some profit-taking was also at hand, following yesterday's
boost from the successful debut of Banco Macro Bansud's American Depositary
Receipts, which in turn bolstered local shares.
-- 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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