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Brazil Waiting Another Central Bank’s Boost in Interest Rates

Latin American equities finished the day mixed, with Brazil and Argentina snapping back from recent weakness, while Mexico slumped. A surge in oil prices and worries about interest rates, both domestically and in the U.S., did loom over the markets.

A sharp decline in U.S. equities after a warning from General Motors and the higher U.S. oil prices also played a part in limiting any regional gains.


Brazil’s benchmark Bovespa Index rose 239.00 points, or 0.87%, while Mexico’s benchmark Bolsa Index fell 87.72 points, or 0.67%. Argentina’s Merval Index rose 2.01 points, or 0.15%.


Brazilian shares snapped back after recent declines, as the market awaited the central bank’s decision on interest rates due later today. There was some division as to what investors believe the central bank would do with respect to rates.


A majority of investors predicted a 50 basis point increase, but there were a number of analysts forecasting a 25 basis point increase. There is growing fear that the high interest rates could undermine Brazilian economic growth.


In corporate developments, oil giant Petrobras said it signed a contract with Libya’s National Oil Corp. to explore and possibly produce oil and gas off Libya’s coast.


Meanwhile, Vale do Rio Doce was active after Peru awarded the mining giant a concession to develop the Bayovar phosphate deposit, where the company has proposed building a 3.3 million metric ton-per-year processing plant. Investors are also awaiting CVRD’s earnings report due Monday.


Mexican stocks remained under pressure today, as weakness in the U.S. following a profit warning from auto giant General Motors and the most recent current account data hit Mexican equities. The U.S. deficits were reportedly behind the selling in emerging market bonds, equities and currencies today. In local economic news, aggregate demand grew 6.8% year-on-year in the fourth quarter, and grew 6% in the full year from 2003.


Homebuilders were active. One investment bank boosted its rating on Urbi to “buy” from “neutral,” while also boosting its price target on the firm. The broker cited the recent declines in stock price and the positive prospects for the sector. Urbi is down about 19% from its February high.


Meanwhile, Homex said late yesterday that it is on track to meet its target of building 27,000 homes this year. The company also plans to increase the proportion of middle-income houses it sells. Over the next five years, the share of middle-income housing is expected to increase to between 20% and 25%.


Argentine equities edged up, building on yesterday’s modest gains. The market has sold off recently in the wake of the government’s successful debt restructuring initiative. In economic news, industrial production for February was up 4.9% from year-ago levels. On a sequential basis, production slid 0.7%, however. The data was below analyst forecasts for growth of 7.1% year-over- year.


On the corporate front, Spanish-Argentine oil firm Repsol YPF said it is considering a bid for a small Canadian oil firm First Calgary Petroleums Ltd. Repsol sees this potential bid as one of many expansion opportunities, the company said. Other firms, including Total, Statoil and Royal Dutch/Shell Group, are also interested in the Canadian firm.


In other corporate developments, Colombian bank Bancolombia was active after a brokerage firm upped the stock to “buy” from “neutral,” citing its recent declines. The broker said there was no reason for the recent fall, and actually boosted its price target on the company’s ADRs.


Thomson Financial Corporate Group
www.thomsonfinancial.com


PRNewswire

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