Brazilian and Latin American equities turned lower on the day, after a substantial ascent during the prior two sessions. A sharp decline in U.S. durable goods orders may have added to market pressures, particularly in Mexico, where the U.S. is a key trading partner.
Brazilian shares declined mildly ahead of the release of minutes from the central bank’s last interest rate meeting. Argentine issues turned slightly higher, although the region’s debt restructuring woes will likely continue for some time.
Brazil’s benchmark Bovespa Index slipped 63.05 points, or 0.25%, while Mexico’s benchmark Bolsa Index fell 123.03 points, or 0.98%. Argentina’s Merval Index edged up 3.62 points, or 0.27%.
Brazilian issues returned some of the impressive gains logged recently. Investors are awaiting tomorrow’s release of the central bank’s minutes from its April meeting, in search of clues about interest rates going forward. Also of note, the Brazilian real hit a fresh 35-month high against the U.S. dollar due to exporter sales of dollars to the market.
In economic reports, the Brazilian Census Bureau, or IBGE, said March’s official jobless rate increased for a third-straight month to 10.8% from 10.6% in February. Still, March’s figure is below the year-ago rate of 12.8% and was beneath economist expectations.
Also, inflation, as measured in the IPCA-15 index, jumped to 0.74% in the March 15 to April 13 period from 0.35% in the February 15 to March 14 period, due in part to higher urban bus fares.
Mexican receipts also turned lower on a bout of profit taking, following a two-day rally. A batch of upbeat corporate reports were unable to sustain investor enthusiasm for stocks.
Also depressing the regional market was a disappointing U.S. report on durable goods orders, which showed a 2.8% drop in March after easing a downwardly revised 0.2% the prior month. The news sparked concern that demand from Mexico’s key trading partner could wane.
In domestic economic news, the National Statistics Institute, or Inegi, said that Mexico’s unemployment rate was little changed in March at 3.95%, compared with 3.92% a year earlier and 3.93% in February.
On the corporate front, Telmex posted a higher first-quarter net profit of 6.29 billion pesos, up from 5.73 billion pesos a year ago, on a jump in sales to 39.04 billion pesos from 30.55 billion pesos. On the news, a major investment bank upgraded the firm to “neutral” from “sell.”
Elsewhere, media conglomerate Grupo Televisa SA posted a 21% jump in its first-quarter net profit to 594.1 million pesos from a year ago on a 17% advance in sales to 6.37 billion pesos. Looking ahead, the firm expects television broadcasting revenues to increase 7% in the second quarter.
In other research reports, a large investment house downgraded glass manufacturer Vitro SA to “underperform” from “peer perform,” after the firm recently posted a first-quarter net loss.
Argentine shares edged higher, although trading was muted as investors digested the latest development in the country’s debt restructuring plan.
The U.S. Court of Appeals for the Second Circuit adjourned a hearing without ruling on whether to release US$ 7 billion in frozen defaulted Argentine government bonds, which could allow the region to commence its US$ 103 billion debt restructuring plan. The timing of a final ruling is still unclear.
In corporate reports, power generator Central Costanera SA said that it will reduce electricity exports to Brazil, as a 300 megawatt generator is down for maintenance and may not be up and running for another month. Argentina’s regulatory authority stipulates that power can be exported only from generators.
Thomson Financial Corporate Group
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