Friday, July 7, 2006, 4:45 PM ET (Thomson Financial): Latin American
issues turned lower on profit-taking, following yesterday's collective
rise. Investors focused on employment data from the U.S. and inflation data
for Brazil and Mexico. Meanwhile, investor focus is starting to shift to
earnings, with the season kicking off next week in the U.S.
Brazil's Bovespa Index declined 431.15 points, or 1.18%. Mexico's
benchmark Bolsa tumbled 218.02 points, or 1.09%, while Argentina's Merval
Index slipped 9.74 points, or 0.57%.
Brazilian shares declined amid economic and corporate reports. There
was some U.S. interest rate anxiety that stemmed from the U.S. employment
report for June in which investors focused on a rise in hourly earnings.
Closer to home, investors cheered a tame inflation report.
Corporate earnings are starting to trickle in, marking the start of
earnings season. Paper and pulp giant Aracruz said that its second-quarter
net profit fell sharply to 230.1 million reais from 492.9 million reais a
year ago. The firm said the decline was due to the appreciation of the real
against the greenback. Despite the decline, the most recent result landed
above analyst expectations. Revenue rose 10% to 881.8 million reais from
803.5 million reais last year.
In economic news, the Census Bureau, or IBGE, said that the IPCA
consumer price index declined a larger-than-expected 0.21% in June from May
on lower fuel prices. The most recent result brings the IPCA inflation rate
for the 12 months through June's end to 4.03%, down from the 4.23% seen at
the end of May.
Turning to brokerage notes, a major investment bank initiated coverage
on toll road operators CCR and OHL Brasil at "buy" as it expects the firms
will benefit from increases spending on transportation infrastructure.
Meanwhile, Mexico turned lower today, giving back some of the gains
incurred on news conservative candidate Felipe Calderon won the official
recount for the Mexican presidency. Still, due to the close margin between
Calderon and rival Andres Manuel Lopez Obrador, investors are concerned
that Lopez Obrador may not give up without a fight.
The central bank said that Mexico's Consumer Price Index advanced 0.09%
in June, which lifted the annual inflation rate up to 3.18% from 3% at
May's end.
In deal reports, U.S.-based Dana Corp. bought out Desc SA de CV's stake
in their joint Mexican auto-part manufacturing venture for US$19.5 million
and its portion of the firms' joint transmission and aftermarket gasket
operations.
Argentina also moved lower on the day. The country had its own
employment data to contend with. The Argentine Ministry of Labor said that
its employment index rose 0.4% in May from the prior month. The index is up
8.2% from May last year.
-- Linda.Shea@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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