Latin American equities surged amid positive local news and gains on Wall Street, as a lackluster U.S. employment report spurred hopes that the Federal Reserve may not hike interest rates as aggressively as previously feared.
On that front, U.S. non-farm payrolls grew by 146,000 in January, well below the anticipated increase of 200,000.
Brazil’s benchmark Bovespa Index rocketed 858.31 points, or 3.45%, while Mexico’s benchmark Bolsa Index firmed 6.12 points, or 0.05%. Argentina’s Merval Index jumped 29.31 points, or 2.09%.
Brazilian issues spiked in pre-Carnaval excitement, as interest rate concerns eased after fresh data showed a downturn in inflation, and U.S. payrolls growth fell short of estimates.
Any signals that the U.S. economy is not overheating, and that U.S. interest rates may not increase as quickly as once believed, are likely to attract fresh funds into emerging markets such as Brazil, which offer higher returns for investors.
In celebration of next week’s Carnaval holiday, the market is scheduled for closures Monday and Tuesday.
New data indicated that Brazil’s IGP-DI inflation index rose 0.33% in January, beneath projections and down from a 0.52% increase in December.
The IGP-DI figure, published by the independent Getúlio Vargas Foundation, was the latest in a series of data that show inflation is beginning to respond to sky-high interest rates.
On the corporate front, Embratel Participações SA said its board of directors set a price of BRL 4.30 per lot of 1,000 shares for a planned US$ 700 million capital increase, which will be used to pay down debt and perhaps buy up other Brazilian assets owned by Embratel’s controlling shareholder, Telefonos de Mexico SA de CV. The stock rose on the session.
Also, shares of Brazilian utilities Cesp and Companhia de Transmissão de Energia Elétrica Paulista remained active, after the São Paulo state government Thursday announced plans to privatize CTEEP, with the proceeds going to pay down debt for state-owned generator Cesp.
Iron ore giant CVRD was in focus, following a few statements out of the Group of Seven industrialized nations meeting that the slowdown in China’s economy is real. The Brazilian commodity sector is dependent on Chinese demand for its exports.
Elsewhere, Mexican shares just barely closed in the black, due to some late profit taking, although the move was enough to ensure the market set its fourth record high of the week. Gains in U.S. stocks provided some support.
Mexico’s dominant fixed-line company, Telmex, said its fourth-quarter operating profit rose 10.7% to MXN 12.35 billion from the year-ago period, while net profit spiked 77% to MXN 10.43 billion, as exchange gains and a tax credit combined with higher sales.
Quarterly sales climbed 28.5% to MXN 40.8 billion. Still, analysts had mixed responses to the company’s results. Also, Telmex’s chief financial officer said in a conference call that the firm intends to invest US$ 1.5 billion in Mexico this year, below an estimate of US$ 2.05 billion provided in late November.
Additionally, Mexican bank Grupo Financiero Inbursa SA reported that its net profit rocketed 122% to MXN 5.37 billion in 2004 from the year earlier, driven by higher business volume and extraordinary income from the restructuring of media group Grupo Televisa SA’s holding company. Prior to gains from the Televisa restructuring, the firm’s net profit leapt 40% to MXN 3.38 billion. The stock nevertheless fell.
Meanwhile, Argentina’s market continued to soar, one day after the Senate approved a new government-penned bill preventing the changing or reopening of the country’s ongoing US$ 103 billion debt restructuring.
Approval took place only hours after the bill was sent to Congress. The ban spurred expectations that bondholders will be forced to agree to the terms of Argentina’s debt swap offer, resulting in a high acceptance rate by the February 25 offer closing date.
Thomson Financial Corporate Group