Tuesday, May 17, 4:45 PM EDT (Thomson Financial): Latin American stocks
plummeted, in line with the U.S. market, as investors reacted to
disappointing U.S. core consumer price data for April.
Brazil's Bovespa Index dropped 1125.76 points, or 2.86%. Mexico's
benchmark Bolsa Index fell 589.20 points, or 2.83%, while Argentina's
Merval Index lost 60.20 points, or 3.45%.
Brazilian stocks tumbled, as a bigger-than-expected rise in U.S. core
consumer prices fueled concerns that the U.S. Federal Reserve may continue
its tightening cycle longer than anticipated in order to contain inflation.
The U.S. consumer price index rose an in-line 0.6% in April on a 3.9%
increase in energy prices. However, the core CPI, which excludes food and
energy, climbed 0.3% for the second month in a row, topping expectations
for a 0.2% rise. The data added to concerns that U.S. interest rates will
continue to rise, potentially diverting investment flows away from emerging
markets like Brazil.
Also weighing on investor sentiment, Brazilian retail sales volume
dropped a seasonally adjusted 0.10% in March from February, the Brazilian
Census Bureau reported. Retail sales gained 3.01% in March from a year
earlier. That was slower than February's year-on-year growth of 5.74%.
However, the year-on- year figures were not seasonally adjusted.
On the corporate front, a bankruptcy judge decided yesterday that any
future buyers of beleaguered airline Varig will not have to assume
responsibility for its massive debt, potentially facilitating additional
bids.
Meanwhile, mining giant CVRD said today that it reached an agreement
for 2006 iron ore price contracts with Japanese steelmakers. The steel
producers agreed to a 19% hike for iron ore fines, while iron ore pellet
prices will decline 3.0%. CVRD reached a similar accord with Germany's
ThyssenKrupp AG late Monday.
Elsewhere, Mexican shares sank on heightened fears of rising U.S.
interest rates following the release of disappointing U.S. inflation data.
Local economic data was more upbeat, however, suggesting the Mexican
economy remains on solid footing. The Finance Ministry said today that
Mexico's gross domestic product rose 5.5% in the first quarter from the
year- ago quarter, and climbed 1.54% from the fourth quarter of 2005 in
seasonally adjusted terms. Economic growth was helped by a recovery in the
industrial sector and a late Easter holiday.
Argentine issues plunged, in line with other Latin American markets,
with steel and bank shares posting some of the biggest losses.
In economic news, the Argentine government posted a primary fiscal
surplus for April of 1.534 billion pesos and an accumulated surplus of
6.442 billion pesos for the first quarter. Economists had expected a bigger
April surplus of 1.725 billion pesos.
Meanwhile, Argentina's industrial production jumped 7.7% in April from
a year earlier and rose 0.3% from March. Both figures were seasonally
adjusted.
-- 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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