Brazilian and Latin American markets surged, after the release of minutes from the Brazilian central bank’s February policy meeting suggesting a more benign stance toward inflation and interest rates.
Brazil’s benchmark Bovespa Index rallied 1237.71 points, or 4.55%, while Mexico’s benchmark Bolsa Index advanced 142.60 points, or 1.05%. Argentina’s Merval Index firmed 8.74 points, or 0.57%.
Brazilian equities spiked, ending at a fresh all-time high, following the release of minutes from last week’s central bank monetary policy meeting.
While the central bank’s notes indicated that further interest rate hikes may lie ahead, they also suggested the bank’s tighter monetary policy is succeeding in reducing inflation expectations.
Additionally, the bank highlighted continued strength in industrial production, commenting that while recent rate increases might produce a temporary lull in activity, Brazil’s economy is continuing the growth cycle began in the second half of 2003.
Inflation data showed prices are beginning to slow. The Brazilian General Price Index, or IGP-M, fell to 0.30% in February from 0.39% in January, according to the independent Getúlio Vargas Foundation.
That result was beneath analyst estimates, which ranged from 0.36% to 0.50%. Additionally, São Paulo’s Fipe research institute said its consumer price index rose 0.37% in the four weeks ended February 23, down from 0.49% in the four weeks to February 15.
The data indicated that consumer inflation in Brazil’s largest city slowed in early February to the lowest level since October 2004, and was below projections for 0.40% to 0.45%.
Shares of Brazilian pay TV company Net Serviços de Comunicação were active, as investors speculated that the firm may be close to finishing the two-year restructuring of 1.4 billion reais of overdue debts.
On the research front, an influential brokerage upped its stance on Brazilian long-distance phone operator Embratel Participações SA to “neutral” from “reduce,” on the heels of a drop in the stock’s price.
Elsewhere, Mexican issues jumped, as corporations continued to post solid fourth-quarter numbers. Among these, conglomerate Grupo Carso reported that its quarterly sales firmed 17% to 19.79 billion pesos, as its net profit leapt fivefold to 3.26 billion pesos, driven by an asset sale and tax benefits.
Also, retailer Comercial Mexicana nearly doubled its fourth-quarter net earnings, as sales edged higher and its operating profit increased 10%. An analyst noted that the firm’s results demonstrated improved profitability in spite of modest sales growth and maintained its “buy” rating on Comercial Mexicana’s shares.
Mexican baked goods firm Grupo Bimbo SA said its net profit surged to 730.5 million pesos in the fourth quarter from 393.3 million pesos in the year-ago period, aided by lower financing and tax costs. Sales increased to 13.46 billion from 12.83 billion.
Meanwhile, Argentine stocks rose, rebounding slightly following Wednesday’s steep drop. Still, buyers remained somewhat tentative one day before the scheduled close of the country’s US$ 103 billion debt restructuring program.
Analysts say the local equity market is targeting a final debt swap acceptance rate of at least 70%. Economy Ministry officials report that results on creditor participation rates will be released on Thursday of next week.
Earlier today, Economy Minister Roberto Lavagna attempted to downplay speculation that the offer period would be extended to give bondholders more time to tender their bonds, stating at a news conference that Friday was “definitely” the close.
In research news, a major investment house estimated that Argentina’s weighting in its benchmark emerging market bond index will increase next month to about 2.7% from 1.9% after the government announces the results of its massive debt exchange offer.
Thomson Financial Corporate Group