Thursday, June 1, 2006, 4:45 PM EST (Thomson Financial): Latin American
shares ended higher today, with Brazil and Mexico rallying to regain lost
ground, despite weakness in commodity prices and worries about global
interest rates.
Brazil's Bovespa Index surged 1218.26 points, or 3.33%. Mexico's
benchmark Bolsa jumped 450.71 points, or 2.41%, while Argentina's Merval
Index gained 29.04, or 1.76%.
Following a half-percentage-point interest-rate cut last night to
15.25%, Brazil's benchmark Ibovespa index rallied today. The decision to
cut the rate was unanimous, and in line with analysts' expectations. But
traders remain worried about the hawkish minutes from the May 10 meeting of
the U.S. Federal Reserve Board, which seemed to signal further rate hikes
in the coming months. Higher U.S. interest rates are what sparked a "flight
to quality" in global markets last week, hurting asset prices in emerging
markets like Brazil.
In Mexico, stocks ended higher amid a raft of mixed U.S. economic data.
On an up note, growth in U.S. non-farm productivity in the first quarter
was upwardly revised from the previous reading, while unit labor costs -- a
key gauge of inflationary pressures stemming from wages -- were revised
lower. However, the ISM index fell in May, signaling a deceleration in
factory activity. Also, pending home sales fell in April.
Closer to home, economists surveyed by the Bank of Mexico in May lifted
their economic growth estimate for 2006 to an average 4.04% from 3.92% a
month earlier, the central bank reported. The improved growth outlook
followed the release last month of data showing a 5.5% growth rate for
Mexico's economy during the first quarter, its fastest pace since President
Vicente Fox took office in December 2000. The strong showing prompted the
government to predict GDP could rise more than 4.5% for the full year.
In other developments, a new rule went into effect that eliminates the
double counting of the shares of firms whose holding companies also form
part of the IPC Index. This means that wireless carrier American Movil will
see its weighting on the IPC fall to about 15% from 19%, based on
Wednesday's closing prices, while that of its holding company, America
Telecom, will be little changed at about 9%. Similarly, fixed-line phone
company Telmex's weighting will fall to about 5.7% from 7.2%.
Ixe brokerage said the changes will likely lead to more trading in
those shares as index funds adjust their portfolios to reflect the new
weightings.
Elsewhere, Argentine stocks extended their tentative recovery from a
recent sell-off in emerging markets Thursday, but in an environment of
continued caution that ensured trading volumes stayed low.
Michael.O'Brien@contractor.Thomson.com
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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