Wednesday, May 10, 4:45 PM EDT (Thomson Financial): Latin American
stocks slumped, with Brazilian and Mexican shares succumbing to selling
pressure after the U.S. Federal Reserve raised interest rates and offered
few clues about the timing of a potential pause in its tightening cycle.
Brazil's Bovespa Index dropped 227.79 points, or 0.54%. Mexico's
benchmark Bolsa Index fell 41.86 points, or 0.19%, while Argentina's Merval
Index added 4.01 points, or 0.21%.
Brazilian stocks dropped on profit taking and disappointment among some
investors that the U.S. Federal Reserve's monetary policy statement today
did not signal a likely pause in the current tightening cycle at future
meetings. The Fed today raised its key short-term interest rate by 25 basis
points to 5% as expected, marking its 16th straight rate hike. In its
accompanying statement, the Fed said further hikes may be needed to address
inflation risks but that the timing of such tightening would be data
dependant. Some investors had hoped the Fed would indicate a near-term
pause in its tightening campaign.
On an up note, local economic data showed a drop in Brazilian
inflation, fueling expectations for a continued decline in domestic
interest rates. The IBGE reported today that inflation as measured by the
official IPCA consumer price index tumbled to 0.21% in April from 0.43% in
March. The IPCA rate for the 12 months ended in April dropped to 4.63% from
5.32% for the 12 months ended in March, marking the lowest 12-month rate
since July of 1999.
In corporate news, steelmaker Companhia Siderurgica Nacional (CSN)
reported a first-quarter net profit of 340 million reals, down 53% from a
year ago, as net revenue dropped 32% to 1.95 billion reals.
Also reporting, electric power utility Companhia Energetica de Sao
Paulo (Cesp) posted a first-quarter net profit of 78.2 million reals, up
sharply from a year-earlier net loss 162.1 million reals.
Meanwhile, a major investment bank started coverage of supermarket
chain Companhia Brasileira de Distribuicao (CBD) with an "overweight"
rating, citing improving same-store sales and strengthened management.
In other analyst actions, another major investment bank downgraded
steel producer Gerdau to "neutral" from "buy," citing a weak outlook for
domestic demand.
Elsewhere, Mexican shares were also dragged under by profit taking and
continued uncertainty about the U.S. interest-rate outlook.
Bucking the downtrend, however, shares of Wal-Mart de Mexico climbed
after the retail giant reported a 9.9% jump in April same-store sales from
a year earlier, helped by a late Easter holiday. Total sales rose 20.7%
from April 2005 to 14.97 billion pesos.
Argentine issues edged up, as investors digested some fresh earnings
news. Textile manufacturer Alpargatas reported a first-quarter net profit
of 7.04 million pesos, while power generator Centro Puerto posted a
first-quarter net loss of 107.2 million pesos. Neither company provided
comparison figures for the year-earlier quarter.
-- 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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