Friday, April 7, 4:45 PM EDT (Thomson Financial): Latin American stocks
retreated, as stronger-than-expected U.S. jobs data stoked concerns about a
continued rise in U.S. interest rates. Brazilian and Mexican shares were
further pressured by profit taking following recent gains.
Brazil's Bovespa Index dropped 358.55 points, or 0.91%. Mexico's
benchmark Bolsa Index tumbled 397.35 points, or 2.00%, while Argentina's
Merval Index fell 13.00 points, or 0.71%.
Brazilian stocks dropped on heightened concerns about rising U.S.
interest rates following the release of stronger-than-expected U.S.
employment data that sent U.S. Treasury yields higher. U.S. non-farm
payrolls jumped by 211,000 in March, exceeding expectations for a rise of
200,000. Also, the unemployment rate fell unexpectedly to 4.7%, the lowest
level since July 2001. The data suggested the economy may be gaining steam,
fueling concerns the Federal Reserve will continue to raise interest rates
to contain inflation. Higher U.S. rates tend to divert investment flows
away from emerging markets like Brazil.
Closer to home, Brazil's official IPCA consumer inflation rate
accelerated to 0.43% in March from 0.41% in February amid higher fuel
prices, the IBGE Census Bureau reported. Still, the rate came in below
forecasts of 0.46%. The monthly rate was slightly lower
In corporate news, paper and pulp producer Aracruz reported a first-
quarter net profit of 347.9 million reais, up 73% from 200.8 million reais
in the first quarter of 2005.
Meanwhile, a major investment bank initiated coverage of Brazil's
largest telecom carrier Telemar with an "equalweight" rating. "This year's
transition to lower tariff hikes, combined with near-zero line growth and
declining local traffic, produces a flattish top line in real terms," the
bank said.
Mexican shares fell sharply, alongside U.S. market declines and amid
profit-taking, as the key IPC Index reached consecutive record highs
earlier this week. U.S. inflation concerns were reignited by a strong March
employment report.
In economic headlines, the Bank of Mexico said that the consumer price
index advanced 0.13% in March, lowering annual inflation to 3.41% from
3.75% in February. The most recent result was mostly in line with analyst
expectations. Core inflation, which excludes some fresh produce, energy and
education, leapt 0.44% in March, lifting the annual rate to 3.04% from a
record low of 2.90% in February.
Turning to corporate reports, a major investment bank lowered its
rating on bottler Coke Femsa to "neutral" from "buy," on a valuation call.
Elsewhere, Standard & Poor's lifted Cemex's credit rating into
investment- grade territory due to the "successful integration" of the RMC
Group of the U.K.
Argentina followed the broader indices into the red today. Similar to
Mexican shares, some profit taking is at work, after the Merval Index
reached a record level this past Wednesday.
Spanish-Argentine firm Repsol-YPF declared a force-majeure on natural
gas deliveries to power firms in Chile due to reduced output from pipeline
damage in Bolivia. Repsol said that domestic demand first needed to be met.
Separately, the firm signed a deal with the Nigerian government to build a
liquefied natural gas plant in Nigeria.
-- 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
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SOURCE Thomson Financial Corporate Group
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