Latin American equities rallied, alongside gains on Wall Street and a decline in crude oil prices. Brazil’s market played catch-up following some favorable news over recent sessions, after a closure Tuesday for a local holiday.
Brazil’s benchmark Bovespa Index jumped 332.44 points, or 1.37%, while Mexico’s benchmark Bolsa Index surged 178.27 points, or 1.39%. Argentina’s Merval Index spiked 45.65 points, or 3.49%.
Brazilian shares climbed on weaker global crude oil prices and U.S. stock gains.
Traders indicated that a broad rally in U.S. shares could spill over to Brazil as international investment funds diversify their portfolios.
It appeared Brazil’s market was catching up following developments Tuesday and Wednesday, after the Brazilian Stock Exchange was closed Tuesday for a local holiday.
Among the positive developments, the official Brazilian Census Bureau released figures Tuesday showing Brazil’s official jobless rate fell to 9.6% in December from 10.6% in November.
That result was within economist projections of between 8.9% and 10.2%. Analysts interpreted the data as suggesting Brazil’s strong economic recovery will continue this year.
Commodity producers also were active, as investors responded to yesterday’s news that China’s fourth-quarter growth surpassed estimates, indicating greater demand for raw materials.
Also, the government reported that China’s economy grew a robust 9.5% in 2004, unexpectedly driven by an export surge in the final months of the year and suggesting plenty of momentum this year.
Turning to research notes, a major brokerage increased its 12-month price target on Petrobras to US$ 50 from US$ 45, citing what its expects “will be a multi-year growth cycle driven by some of the highest production growth rates in the global oil industry.”
Another investment house, while increasing exposure to banks and telecom stocks in its Latin American model portfolio, reiterated its “attractive” industry view on Brazilian financial institutions.
The analyst called valuations “interesting” and said Brazilian loan growth is accelerating rapidly.
The analyst hiked year-end price targets on Unibanco’s American Depositary receipts to US$35 from US$25 and said it sees upside potential on locally-traded shares of Banco Itaú and Banco Bradesco of 24% and 17%, respectively.
Also, an influential investment bank downgraded Brazilian highways operator CCR to “Neutral 2” from “Buy 2,” remarking that investors have already priced in “most of the good news.”
Elsewhere, Mexican issues surged to their second record closing high of 2005, powered by strength in telecommunications heavyweights and further gains in U.S. stocks.
Macroeconomic indicators have also been providing support. On Tuesday, the National Statistics Institute reported that economic activity expanded 6% in November, its largest year-on-year rise since October 2000.
The data confirmed that gross domestic product continued its strong advance in the fourth quarter, and reinforces estimates for GDP expansion over 4% in 2004.
On the corporate front, America Movil’s stock rallied in anticipation of the firm’s fourth-quarter earnings release after tomorrow’s close. Analysts foresee robust subscriber growth in both Mexico and Brazil.
In economic news, Mexico’s retail sales rose 6.7% in November from the corresponding month a year earlier, driven by a leap in auto sales. Analysts had forecast a retail sales increase of 5.2%, on average.
Separately, Argentina’s market rocketed ahead, breaking out of its narrow range of the last week as investors welcomed some minor breakthroughs in the government’s contentious dealings with privatized utility firms.
This morning, visiting Spanish Prime Minister Jose Luis Rodriguez Zapatero said he will meet with Spanish telephone company Telefonica and power company Endesa to help them reach an understanding with the Argentine government.
Telefonica and Endesa have claims against Argentina in the World Bank’s arbitration tribunal.
Thomson Financial Corporate Group