Monday, April 10, 4:45 PM EDT (Thomson Financial): Latin American
stocks were mixed, with Brazilian shares falling on concerns about the
impact of rising oil prices on the outlook for inflation and interest
rates. Meanwhile, Mexican shares rose on bargain hunting following a sharp
drop on Friday.
Brazil's Bovespa Index dropped 451.76 points, or 1.16%. Mexico's
benchmark Bolsa Index rose 75.99 points, or 0.39%, while Argentina's Merval
Index jumped 21.36 points, or 1.17%.
Brazilian stocks sank, as a jump in crude oil prices fueled concerns
about inflationary pressure in the U.S. and the need for a continued rise
in U.S. interest rates. Higher U.S. interest rates tend to divert
investment flows away from emerging markets like Brazil. Investors also
fear that higher energy costs will stoke local inflationary pressures,
inhibiting the Brazilian central bank's move to lower interest rates.
Recent economic data has pointed to tame local inflation and led
analysts to repeatedly lower their 2006 inflation and interest-rate
outlooks. According to the Brazilian central bank's latest weekly market
survey released today, analysts and economists reduced for the second
consecutive time their forecasts for 2006 year-end inflation as measured by
the official IPCA index. They also cut their year-end 2006 forecast for the
benchmark Selic base interest rate to 14% from 14.13% a week ago. The
central bank has reduced the Selic rate at its past six meetings. The rate
now stands at 16.5%.
In corporate news, miner CVRD denied Chinese reports that the company
had reached a deal with Chinese steelmakers to raise iron ore prices by
10%. The denial was in response to reports made by China-based Web site
MySteel.com that CVRD had inked a deal with Chinese steelmakers that called
for the 10% price hike. CVRD President Roger Agnelli had confirmed last
month the company was seeking a 24.6% increase to 2006 price contracts.
Oil giant Petrobras said Bolivian natural-gas supplies to Brazil will
return to normal flows next week. Gas imports from Bolivia were cut last
week after heavy rains damaged pipelines there and repair work was impeded
by protests.
Meanwhile, a major investment bank upgraded Net Servicos to
"overweight" from "underweight."
On the political front, a survey conducted by the Datafolha polling
institute showed that if elections were held today, President Luis Inacio
Lula da Silva would beat the opposition Social Democratic Party candidate
Geraldo Alckmin 40% to 20%. The survey suggested that Lula's reelection
chances have not been seriously hurt by ongoing corruption allegations that
have affected his administration. It was the first nationwide survey since
former finance minister Antonio Palocci resigned.
Mexican stocks witnessed healthy gains, bouncing back from a steep fall
last Friday that was spurred by a stronger-than-expected U.S. employment
report, which raised interest-rate hike concerns. Also aiding Mexico was a
rally in crude oil prices, which surged to a level near US$69 a barrel.
Mexico is an exporter of oil.
In corporate reports, a major investment bank raised its price target
on America Movil due to forecasts for a weakening Mexican peso and
strengthening
Brazilian real. The brokerage is also optimistic for the firm's
subscriber growth forecasts.
Last Friday, retailer Wal-Mart de Mexico posted a first-quarter net
profit of 2.43 billion pesos, compared with 1.92 billion pesos in the
corresponding period a year ago. Operating profit leapt 29% to 3.13 billion
pesos from last year's 2.43 billion pesos. Sales advanced 12.9% from a year
ago to 41.99 billion pesos, while same-store sales rose 3.8%. The
retailer's shares gained on the day.
Turning to the economy, the Finance Ministry said that the trade
surplus in February was downwardly revised to US$405 million from US$461
million. The accumulated trade surplus for the first two months of the year
stands at US$939 million.
Argentina also bounced back from downbeat trading last Friday, and
posted solid gains today.
The country's Mendoza province intends to put 13 oil and gas blocks up
for auction upon the approval of the province's new hydrocarbons law.
-- 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
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SOURCE Thomson Financial Corporate Group
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