High Interest Rates Don’t Deter Brazil Market’s Star Trek

Latin American equities rebounded after a few sessions of volatile trading. Investors brushed off Brazil’s latest interest rate increase on hopes that the central bank is near the end of its monetary policy tightening campaign. 

Argentina benefited from strong gross domestic product data for the fourth quarter, while Mexico also posted gains. Brazil’s benchmark Bovespa Index gained 259.12 points, or 0.93%, while Mexico’ s benchmark Bolsa Index added 42.21 points, or 0.32%. Argentina’s Merval Index surged 64.85 points, or 4.67%.


Brazilian stocks rose, as the market brushed off news that the central bank hiked interest rates late yesterday by 50 basis points. The key Selic rate now stands at 19.25%, as the bank struggles to bring inflation under control.


Some investors were hoping for a more modest increase of just 25 basis points, as there is growing concern that the high interest rates will begin to undermine economic growth. Investors do believe that the central bank is approaching the end of its monetary policy tightening campaign.


In other economic news, industrial employment in São Paulo state, the economic hub of Brazil, rose 0.33% in February, according to seasonally adjusted figures. The manufacturers in São Paulo represent about 40% of Brazil’s industrial output.


Turning to corporate news, mining giant Companhia Vale do Rio Doce announced that it is likely to hike the price for iron ore it supplies to Brazilian steelmakers by 71.5%, the same amount as its recent price increase for overseas companies.


Embraer was also active ahead of its quarterly earnings results due out later March 17.


Out of Mexico, the market rose brushing off recent declines as investors remain optimistic about the country’s growth prospects. Investors remain optimistic about corporate profit growth in Mexico, as strength in the U.S. economy continues to aid Mexico.


Argentine stocks rose sharply, as the market tries to recoup some of the losses incurred earlier in the week. Additionally, the government reported that fourth-quarter gross domestic product jumped 9.1% from a year earlier, beating forecasts for growth of 8.7%. For the full year, growth was 9.0% also ahead of estimates for an 8.8% increase.


Natural gas pipeline operator Transportadora de Gas del Sur surged, as investors are anticipating that the government will soon hike long-frozen utility rates for gas and power companies, as several key players have public hearings on new contracts in the coming weeks.


Thomson Financial Corporate Group
www.thomsonfinancial.com


PRNewswire

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