Monday, June 5, 2006, 4:15 PM ET (Thomson Financial): Latin American
stocks dropped, in line with the U.S. market, on concerns about rising U.S.
inflation and interest rates. In Argentina, new economic data showed local
inflation eased in May.
Brazil's Bovespa Index tumbled 1202.32 points, or 3.17%. Mexico's
benchmark Bolsa Index dropped 466.81 points, or 2.40%, while Argentina's
Merval index plunged 42.66 points, or 2.52%.
Brazilian shares declined on concerns about inflation overseas as
interest rate concerns eclipsed news of a government move to buy back up to
US $4 billion in external debt.
According to analysts, investor sentiment about emerging market
investments received a boost early today from Brazil's decision to
repurchase some US $4 billion in bonds. The buyback, which was aimed at
improving Brazil's external debt profile, underlines the strong economic
fundamentals in the country, analysts said.
In addition, a lack of inflationary pressures raised expectations for
the Brazilian Central Bank to continue its recent monetary easing cycle. In
May, the bank reduced the Selic base interest rate to 15.25% per year, the
eighth- consecutive rate cut.
Among the movers, mining giant Companhia Vale do Rio Doce declined.
Late Friday, the company said its bid to develop an iron ore deposit in the
African country of Gabon was unsuccessful.
Steelmakers were lower across the board, with Arcelor Brasil, the
umbrella company for No. 2 global steel giant Arcelor's Brazilian
steelmaking assets, down at day's end.
In Mexico City, shares sank, with some traders saying the summer season
and Friday's World Cup opener were slowing trading activity.
Bucking the downtrend, share of wireless phone giant America Movil were
higher. Deutsche Bank raised the stock to "buy" from "hold" Monday.
Elsewhere, Argentinean issues fell, despite news that inflation eased
in May, as food prices showed the effect of new government price accords.
According to INDEC, the consumer price index rose 0.5% in May from April,
and 11.5% from a year earlier, a halving in the monthly rate from that of
April and comfortably below a median forecast of 0.7% taken from a Dow
Jones Newswires survey of five economists. After easing earlier this year
from the 12.3% it hit at the end of last year, the annual inflation rate
jumped back up to 11.6% in March from 11.1% in April.
Meanwhile, Bolivia said that negotiations over the price of its
natural- gas exports to Argentina have stalled after Argentina said it was
shipping some of the gas to Chile, Bolivia's longtime rival.
-- 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
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SOURCE Thomson Financial Corporate Group
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