Brazilian and Latin American markets appeared relatively calm amid the latest U.S. rate hike. Traders are also digesting the FOMC’s outlook for future monetary policy, which maintained language for a “measured” pace of rate increase.
Brazilian shares finished little changed on the news. Mexican receipts declined, as turmoil from TV Azteca continued to make headlines. Also, Argentine issues continued to move higher ahead of the country’s earnings releases.
Brazil’s benchmark Bovespa Index edged up 11.03 points, or 0.04%, while Mexico’s benchmark Bolsa Index fell 67.07 points, or 0.54%. Argentina’s Merval Index advanced 25.63 points, or 1.86%.
Topping U.S. economic headlines, the Federal Open Market Committee lifted its target for overnight interest rates for the eighth-straight time by 25 basis points to 3%, as expected.
The Fed’s accompanying statement remained similar in tone to recent releases, saying further rate increases would be “measured.” Still, the committee noted that higher energy prices have contributed to slowing spending growth.
Brazilian issues were mixed to higher, as investors digested a tightening in U.S. rates. Traders largely expected the FOMC’s decision to lift rates, and were likely relieved by the Fed’s indication that although its tightening cycle will likely continue, the pace will continue to be measured. Investors also had a deluge of earnings to contend with.
Within the steel sector, CST, which is controlled by Luxembourg’s Arcelor, posted a surge in its first-quarter net profit to 527 million reais from 175 million reais in the corresponding period a year ago. An improving product mix and favorable market conditions were credited for the quarterly advance.
Elsewhere, Gerdau nearly doubled its quarterly net profit to 811 million reais in the first quarter from 427 million reais a year earlier. EBITDA advanced 60% to 1.415 billion reais. The steelmaker’s sales volumes advanced 6.6% and net revenue climbed to 5.8 billion reais from 4.2 billion reais. Separately, Gerdau intends to invest US$ 1.1 billion to increase the capacity of its Açominas operations in Ouro Branco, Minas Gerais state.
Meanwhile, Brazil’s second-largest private bank, Banco Itaú, posted an in-line first-quarter net profit of 1.14 billion reais, up from 876 million reais, mostly due to the expansion of its credit portfolio. Service revenues climbed to 1.79 billion reais from 1.405 billion reais.
Mexican receipts finished lower, hurt by a plunge in TV Azteca. The broadcaster announced that it is considering delisting from the New York Stock Exchange.
Grupo Elektra SA and Grupo Iusacell SA also said they intend to submit proposals to shareholders for U.S. delistings.
The announcements follow fraud charges issued by the U.S. Securities and Exchange Commission, as well as potential criminal charges from Mexican authorities, against billionaire Ricardo Salinas Pliego, who controls the firms, and other TV Azteca executives. The charges relate to a 2003 debt transaction.
In economic reports, Inegi, the National Statistics Institute, reported that consumer confidence declined in April to 100.3 from 105.7 in March, but rose from 96.5 in the corresponding period a year ago.
Meanwhile, Argentine issues were upbeat ahead of the country’s first-quarter earnings season. The reports may overshadow the ongoing US$103 billion debt restructuring, which may be resolved within the next few weeks.
Elsewhere, Venezuelan Minister of Energy and Oil Rafael Ramirez said that PdVSA does not intend to sell any Citgo refineries.
He also announced that existing contracts with oil companies operating in Venezuela are illegal, and that firms must commit to higher taxes and greater participation by PdVSA in order to have agreements with the government.
Thomson Financial Corporate Group