Brazilian and Latin American equities declined, alongside gains in commodity prices and weakness in the U.S. dollar, spurring inflationary concerns. World crude oil prices topped US$ 51 a barrel on supply concerns and cold weather in the U.S. Northeast.
Also, the U.S. dollar dropped sharply against other international currencies following news South Korea will diversify the currencies it holds as part of foreign reserves.
Brazil’s benchmark Bovespa Index fell 112.99 points, or 0.42%, while Mexico’s benchmark Bolsa Index slid 79.88 points, or 0.59%. Argentina’s Merval Index rebounded 22.02 points, or 1.40%.
Brazilian issues fell due to fears over higher global oil prices and rising interest rates. Brazil is a major importer of crude oil and oil products, with higher prices viewed as inflationary for Brazil.
Still, the rise in oil boosted shares of Petrobras, which might be able to increase domestic prices for its oil products. Also, Brazil could experience further interest rate hikes, with the release of minutes from February’s Central Bank meeting on Thursday signaling the possibility of additional monetary policy tightening in March. Most economists forecast an increase by 25 basis points to 19.0% annually.
Shares of Companhia Vale do Rio Doce surged, after it publicized a 71.5% price increase for the iron ore it ships to Japan’s Nippon Steel. However, the news weighed on steel makers, as some of them will have to pay more for the iron ore they use.
CVRD supplies virtually all iron ore consumed by local steelmakers like slab exporter Companhia Siderúrgica de Tubarão, long-steel maker Gerdau SA and flat-steel maker Usiminas.
The price hike was smaller than the 90% increase CVRD said it wanted a few weeks ago but still larger than anticipated by markets.
On the earnings front, Banco Itaú displayed fourth-quarter net profits that climbed to 1.030 billion reais from 854 million reais in the year-ago period. That result was near the top of analyst projections for earnings of 920 million reais to 1.061 billion reais.
Brazil’s second-largest private bank said its 2004 net profit reached 3.776 billion reais, which according to Economática Consulting Group was the highest on record for any Brazilian bank. Buyers lifted Itaú’s stock in response.
Brazilian airline Gol said it signed a contract with Boeing to exercise five more purchase options for the 737-800 Next Generation aircraft.
Amid research notes, an influential brokerage downgraded Telesp to “neutral” from “buy,” due to steep valuations. The analyst commented that Telesp’s stock has jumped 25% in the past 30 days compared with a 16% advance for the Brazilian market.
Elsewhere, Mexican shares declined, on weakness in U.S. stocks. In corporate announcements, Corporacion Geo SA said its fourth-quarter operating profit firmed 21.8% to 448.1 million pesos as its net profit strengthened 56.9% to 329.3 million pesos.
Also, Mexico’s leading home construction company said its quarterly sales of homes increased 10.5% to 11,198 homes from the year before as revenue solidified 17% to 2.4 billion pesos.
Shares of Asur were active, following news the Mexican government is preparing to sell its remaining 11% stake in the firm.
Turning to research news, a major investment bank cut its rating on shares of Mexican brewer Grupo Modelo SA to “peer perform” from “outperform,” based on a lack of liquidity in the stock and favoring rival brewer Femsa.
The bank also maintained its “outperform” rating on Femsa, and increased its price target to US$70 per American Depositary Receipt from US$59 per ADR.
Meanwhile, Argentina’s market reclaimed almost all of the ground lost amid the prior session’s profit taking, as investors continued to look towards Friday’s closing of the government’s US$103 billion debt restructuring.
The benchmark Merval Index had tumbled 1.5% yesterday, marking only its third down session so far this month.
Analysts commented that the lack of a jump in trading after the U.S. Presidents Day holiday on Monday signifies that investors, while no less confident regarding the debt swap outcome, are settling down to wait for final participation figures next week.
Thomson Financial Corporate Group