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Brazilian Market Volatile Mirroring the U.S.

Brazilian and Latin American markets ultimately finished lower on the day, after see-sawing between positive and negative territory for much of the session. Shares initially benefited from cooling U.S. inflation concerns, amid yesterday’s release of the FOMC minutes from the March meeting and today’s weaker-than-expected retail sales report for March.

Still, despite receding oil prices, U.S. stocks turned lower in the latter half of the day, followed by Brazilian and Mexican issues. Meanwhile, Argentine issues continue to falter ahead of the resolution of the nation’s debt restructuring.


Brazil’s benchmark Bovespa Index receded 140.10 points, or 0.53%, while Mexico’s benchmark Bolsa Index tumbled 97.87 points, or 0.78%. Argentina’s Merval Index slumped 28.03 points, or 2.04%.


In economic reports, the International Monetary Fund boosted its economic growth forecast for Latin America and the Caribbean to 4.1% in 2005 from its prior outlook of 3.6% growth. Domestic demand was one of the key reasons for the brighter outlook.


Brazilian shares turned decidedly lower in the later half of the session. Yesterday’s U.S. FOMC minutes and today’s weaker-than-expected U.S. retail sales report, both indicating tame U.S. inflation, failed to keep Brazilian shares positive.


Traders also overlooked oil’s recession toward US$ 50 a barrel. U.S. weekly inventory data showed larger-than-expected builds in both U.S. gasoline and crude inventories last week.


Turning to corporate reports, state-run oil firm Petrobras SA announced that it will spend US$ 6.1 billion from 2004 to 2010 to expand its gas pipelines in Brazil, as both household and industry demands increase.


Meanwhile, the airline industry continues to share market focus. A major investment group upgraded Gol Linhas Aereas Inteligentes SA to “buy” from “neutral,” due to the firm’s promising risk/reward scenario, partly stemming from the firm’s revised plan to add to its fleet.


Separately, the region’s largest domestic airline, TAM SA, expects to raise between 800 million and 900 million reals through primary and secondary stock offerings this year, according to Valor Econômico.


Mexican shares declined on the session, as weaker U.S. retail sales represent a negative for the region. The vast majority of Mexican exports are sent to the U.S.


In corporate reports, Petroleos Mexicanos announced that it needs to spend at least US$ 1.5 billion a year on exploration if it is to reach its medium-term reserve replacement targets.


Petroleos Mexicanos said that the investments should allow the firm to reach its 100% replacement goal for total reserves by 2010.


Elsewhere, miner Southern Peru Copper, in which Grupo Mexico SA owns a 75.1% stake, said that it will pay a dividend worth about US$ 2.38 per share on May 13 to shareholders on record April 29.


Argentine shares continued to buckle under the weight of the debt restructuring. The International Monetary Fund warned that Argentina’s government needs to re-establish relations with international capital markets and resolve problems within its utility sector if the nation wants to sustain its economic recovery.


To that extent, Argentine Planning Minister Julio De Vido is set to visit Bolivia next week in a bid to negotiate natural gas prices. Bolivia currently delivers 7.7 million cubic meters of gas to Argentina a day.


The current price rate is US$ 2.08 per million British thermal units. Last  month, Bolivia’s Energy Minister indicated the region wants to potentially double that rate.


Thomson Financial Corporate Group
www.thomsonfinancial.com


PRNewswire

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