Brazilian and Latin American equities rose, as investors reacted positively to the U.S. jobs report for February. Investors were heartened that the employment report was strong, but not so strong as to prompt more aggressive U.S. monetary policy.
Brazil’s benchmark Bovespa Index surged 528.79 points, or 1.84%, while Mexico’s benchmark Bolsa Index gained 79.81 points, or 0.58%. Argentina’s Merval Index added 4.23 points, or 0.27%.
In economic headlines, the U.S. unemployment rate rose to 5.4% in February from 5.2% the prior month. Analysts had predicted a flat reading.
Non-farm payrolls surged 262,000, following a downwardly revised gain of 132,000 in January and compared with forecasts of a 220,000 increase.
Brazil’s market leapt to another record closing high, as the rise in U.S. unemployment last month eased fears over aggressive Federal Reserve monetary tightening.
Additionally, while the payroll increase topped expectations in February, it was still not enough to demonstrate a convincing return to robust economic growth.
Investors responded favorably, as the prospect of strong expansion in the U.S. could mean higher interest rates there, which would draw funds away from emerging markets.
Separately, Brazil’s auto manufacturers displayed strong gains in February production, sales and exports, building on 2004’s record performance.
The National Association of Motor Vehicle Manufacturers, or Anfavea, reported that Brazilian motor vehicle production in February totaled 186,051 units, up 15.7% from January and an increase of 20.1% from the year before.
Shares of Brazilian mining giant CVRD advanced, after the firm said yesterday it has concluded iron ore price negotiations with European steel titan Arcelor and will hike prices by 71.5% this year.
Elsewhere, Mexican issues advanced, powered by the U.S. employment data and rising metals prices. The gains in U.S. payrolls bode well for Mexico, whose economy relies on U.S. consumers to buy nearly 90% of its exports. Shares of industrials and conglomerates paced the market’s rise.
In deal news, Alfa’s food unit, Sigma, has closed the purchase of New Zealand-based Fonterra Cooperative Group Ltd.’s Mexican holdings for an undisclosed sum.
Also, Cemex rose, following the completion Tuesday of its US$5.8 billion acquisition of the U.K.’s RMC Group, making Cemex the world’s largest ready-mix concrete firm.
Meanwhile, Argentine shares posted limited gains, as the market digested some major intra-day volatility on the debt acceptance rate.
Economy Minister Roberto Lavagna announced late yesterday that Argentina’s US$ 103 billion debt restructuring had won 76% approval from bondholders, based on preliminary estimates.
Analysts explained that some investors sold off in the wake of the number’s release as the market had overshot and priced in an 80% rate, while others simply used the government’s announcement as an excuse to take profits after February’s sizable rally.
Ultimately, analysts suggested that the figure will be viewed as positive, as the rate has already been cheered by the government and is expected to please the International Monetary Fund as well.
Agustin Carstens, the deputy managing director of the IMF, said that Argentina’s debt swap results so far have been “very good,” calling the restructuring “an important step for the Argentine economy.”
However, one potential trouble spot is Argentina’s February inflation data. Consumer prices increased 1% from January, exceeding the 0.5% consensus outlook.
One brokerage noted that the result is of particular concern because the early-year jump comes without major adjustments in utility rates, which have been frozen for three years but are due for increases in 2005.
Thomson Financial Corporate Group
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