Tuesday, April 18, 4:45 PM EDT (Thomson Financial): Latin American
stocks powered higher, led by Brazilian shares, on indications the U.S.
Federal Reserve is close to ending its interest-rate hiking campaign.
Brazil's Bovespa Index surged 1109.99 points, or 2.89%, while Mexico's
benchmark Bolsa Index advanced 187.73 points, or 0.96%, and Argentina's
Merval Index jumped 26.33 points, or 1.39%.
Brazilian stocks rallied, with the Bovespa surpassing an all-time high,
as investors were cheered by tame minutes from the U.S. Federal Reserve's
last interest-rate meeting as well as a drop in U.S. Treasury yields. The
minutes suggested that the Fed's current cycle of monetary tightening is
nearing an end. "Most [FOMC] members thought that the end of the tightening
process was likely to be near and some expressed concerns about the dangers
of tightening too much, given the lags in the effects of policy," the
summary of the March 27-28 meeting said. Higher U.S. interest rates tend to
divert investment flows away from emerging markets like Brazil.
Meanwhile, investors also remained optimistic about the local interest-
rate outlook. Brazil's central bank is widely expected to extend its run of
interest rate cuts at tomorrow's policy meeting with a reduction of 75
basis points to the Selic rate. Interest rates currently stand at a lofty
16.5%.
Adding to positive sentiment, Brazil's Planning Ministry indicated in
budget guidelines issued today that it expects Brazil's primary budget
surplus to be maintained at 4.25% of gross domestic production through 2009
amid a continuation of austere fiscal policies.
In corporate news, oil giant Petrobras said late yesterday that its
board approved the conversion of all shares of its petrochemicals unit
Petroquisa into Petrobras shares. Petrobras already owns 99% of
Petroquisa's shares. Separately, a major investment bank raised its
year-end price target for Petrobras to US$105 from US$98, "on the back of
strong refining margins expected in 1H06."
Elsewhere, Mexican shares jumped, in line with regional equities, on
optimism about U.S. interest rates. Mexico's bolsa was also supported by
continued hopes for a strong first-quarter earnings season, which is
expected to gain steam this week and next with a flood of quarterly
reports.
Among individual shares, mining company Grupo Mexico was in focus as a
nearly month-long strike continued at its La Caridad copper mine. Last
week, the company declared force majeure on copper shipments due to the
strike. The company said yesterday that it can meet its April commitments,
but could have problems next month if the walkouts persist. Grupo Mexico
also said yesterday that a continued strike at its zinc mine in Zacatecas
may prevent it from meeting orders for refined zinc next month.
Argentine issues followed Latin American markets higher on expectations
for a near-term end to the U.S. monetary tightening cycle. Lending
additional support, a monthly survey released by the Argentine central bank
showed that economists expect robust economic growth in February. According
to the survey, the median forecast among economists is for Argentina's
economic activity to have grown 8.3% in February from a year earlier. While
that is down from January's 9.1% growth, it still suggests continued
economic strength.
-- 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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