Brazilian and Latin American equities strongly advanced on the session, as did stocks worldwide. Investors paid particular attention to U.S. market strength on upbeat financial reports and a PPI release that showed inflation is mostly in check.
Brazilian issues led the markets higher, ahead of its own interest-rate decision tomorrow. Mexican shares turned higher on some upbeat corporate news, following a string of losses. Also, Argentine issues surged on a solid economic report.
Brazil’s benchmark Bovespa Index rallied 689.13 points, or 2.77%, while Mexico’s benchmark Bolsa Index surged 271.54 points, or 2.31%. Argentina’s Merval Index leapt 36.71 points, or 2.81%.
In U.S. economic reports, the producer price index rose 0.7% in March, while the core index rose 0.1%. Economists had expected a 0.6% increase in the overall index and a 0.2% gain in core prices.
Brazilian stocks rallied, building on yesterday’s gains and rebounding from a recent spate of losses, as foreign investment funds reentered the market.
Economists believe the central bank will most likely hold interest rates steady at 19.25%, with an announcement due after the market’s close tomorrow.
Embratel Participações SA, Brazil’s long-distance phone company, said that improved cost control and higher revenue helped boost its first-quarter net profit to 43.3 million reals from 4.6 million reals in the corresponding period a year ago.
The most recent result landed ahead of analyst expectations. EBITDA climbed to 464.6 million reals from 448.4 million reals a year earlier, while revenue edged up to 1.896 billion reals from 1.892 billion reals.
Turning to corporate research reports, a major investment bank upgraded waterworks firm Companhia de Saneamento Básico do Estado de São Paulo, or Sabesp, to “outperform” from “peer perform,” as the firm’s share price has fallen steeply since February.
The same brokerage downgraded electric power utility Tractebel Energia SA to “peer perform” from “outperform.”
Aneel, the Brazilian Power Authority, last night granted an average rate hike of 9.42% to AES Sul and an average hike of 21.93% to RGE. Although the rate increases are above Brazilian inflation, which stands at an annual rate of about 7%, Aneel said, “The hikes are based on a study of the costs confronted by the utilities over the past year.”
Within the banking sector, Banco Bradesco announced last night that it has purchased the management rights for Banco Morada’s consumer credit portfolio for 80 million reals.
Mexican shares rebounded sharply, following four-consecutive down sessions. The positive move mirrors similar optimistic sentiment in the U.S., which is an important trading partner to Mexico.
Meanwhile, Economy Minister Fernando Canales said that Mexico’s trade deficit will further widen in 2005, but should remain below US$ 9 billion. 2004’s trade deficit totaled US$ 8.53 billion.
In research notes, a major investment house upgraded media firm Grupo Televisa SA to “peer perform” from “underperform,” due to the firm’s “agreeable” price and on strong cash flow levels. That firm rallied in response.
Elsewhere, another large broker lifted its 2005 earnings estimates for banking group Banorte due to solid loan growth and the widening of its net interest margin.
Argentine shares bounded higher, as economic growth showed modest gains in a preliminary February reading and arrived above expectations.
INDEC reported that gross domestic product edged up 0.1% in February on a seasonally adjusted basis from January.
Meanwhile, the year-over-year gain was 8.6%, above analyst expectations.
Thomson Financial Corporate Group
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