Brazilian and Latin American stocks tumbled, dragged down by concerns that higher U.S. interest rates will pull more foreign investors away from the region’s assets.
Today, the U.S. Federal Reserve hiked interest rates by 25 basis points and made some more cautious comments on the prospects for inflationary pressures, which it is feared could result in more aggressive rate increases.
Brazil’s benchmark Bovespa Index tumbled 793.28 points, or 2.89%, while Mexico’ s benchmark Bolsa Index lost 31.95 points, or 0.24%. Argentina’s Merval Index slumped 20.83 points, or 1.47%.
Brazilian shares dropped, giving up earlier gains, as the market reacted negatively to the U.S. interest rate increase.
The market had earlier brushed off news that the General Price Index rose 0.55% in the 10 days through March 20, up from 22% for the same period of February, according to the Getúlio Vargas Foundation.
The result was in line with market forecasts, with an accelerating wholesale component pulling the overall index higher.
In corporate news, iron ore miner CVRD was active after posting record results for the fourth quarter. Some analysts were a bit disappointed in the numbers, but remain optimistic on the stock.
One brokerage firm said that the relevance is “modest given the huge impact from the upcoming 71.5% iron ore price hike and the bullish company guidance/outlook.”
Also, AmBev announced that it will begin selling its flagship Brahma brand in nine new European and North American markets this April, and then expand distribution to several more international markets by the end of the year. AmBev is attempting to turn Brahma into a global beer brand.
Mexican equities also moved lower, reversing earlier gains, as declines in the U.S. market weighed on sentiment. The market was closed yesterday for a holiday and will be closed Thursday and Friday, sapping volume from the trading session.
In economic news, consumer prices for the first half of March rose 0.20%, just shy of forecasts for a 0.21% increase. The data was also little changed from a year earlier when consumer prices were up 0.18%. The recent data keeps annual inflation steady at about 4.3%.
Also, January retail sales were up 6.2% from a year earlier, and climbed 1.62% from December in seasonally-adjusted terms. The year-on-year increase was in line with forecasts. January marked the 25th straight month of year-on- year gains.
Looking at corporate developments, Telmex announced that it has increased its stake in Brazil’s largest pay television firm, Net Serviços de Comunicação.
Telmex now owns a 36.6% direct stake in the company’s voting shares, and a 19.6% stake in total capital, as Telmex looks to expand its presence in the Brazilian telecom market.
Out of Argentina, the market continued to weaken, as investors remain wary of the equities, after their recent surge. Investors now want the government to take steps to address other economic and political issues.
On the economic front, the current account surplus for the fourth quarter reached US$ 484 million because of strong export-related inflows.
A pick up in imported goods and services and higher dividend payments offshore helped narrow the surplus from last year’s US$ 1.079 billion. The 2004 current account surplus was US$ 3.029 billion.
Also, final February industrial production rose a seasonally adjusted 4.9% year-on-year. The February number was down 0.7% from January, however.
The results were unchanged from the preliminary figures reported last week. Economists had expected a stronger gain for the month.
Looking at the bank group, Grupo Financiero Galicia said late yesterday its main asset, Banco de Galicia y Buenos Aires, was considering a 1 billion peso bond program. It would mark the bank’s first time in the capital markets since it completed its 2004 debt restructuring.
Thomson Financial Corporate Group
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