Brazilian and most Latin American markets closed lower, as ongoing selling in commodity-related stocks plagued the region. Brazil and Mexico posted sizeable losses on the day, with weakness in U.S. blue-chip equities compounding the downward pressure. Argentina was a positive standout, after the market spiked late in the day.
Brazil’s benchmark Bovespa Index fell 229.83 points, or 0.95%, while Mexico’s benchmark Bolsa Index lost 101.01 points, or 0.81%. Argentina’s Merval Index jumped 49.81 points, or 3.58%.
In Brazil, stocks continued to sell off, as commodity-related issues have been taking a beating on weaker prices and worries about global demand.
Meanwhile, Brazil’s Supreme Court will advance a probe into the past private finances of the head of the central bank.
Federal prosecutors are also asking the court to look into alleged misuse of public funds by the head of the country’s social security agency.
Investors are concerned that both probes will disrupt the country’s move toward stability.
Turning to earnings news, utility Cemig announced that its profits rose to 554 million reais for the first quarter, up from 296 million reais a year earlier, as net revenue jumped sharply to 1.624 billion reais.
Results were well ahead of analyst expectations, as a rise in consumption due to the economic recovery boosted profits. Earnings are expected to remain strong for the rest of the year.
Also, Eletrobrás said its net profits climbed to 575 million reais, compared with last years 445 million reais, as the bulk of its profits came from its Furnas and Chesf subsidiaries. A decline in financing costs also had a positive impact on its bottom line.
Out of Mexico, stocks slumped on weakness in U.S. blue-chip equities. A poor U.S. consumer confidence figure raised some concerns that U.S. demand for Mexican goods could falter, adversely impacting the domestic economy. The U.S. serves as Mexico’s chief export market.
Meanwhile, the Bank of Mexico left its monetary policy unchanged at its twice-monthly meeting, amid expectations that inflationary pressures are on the wane.
The central bank left its key money market liquidity restriction, or “corto,” at 79 million pesos. Some economists are optimistic that the monetary tightening campaign may finally be over.
Elsewhere, an influential U.S. investment bank cut its recommendation on Mexican debt, citing the recent price outperformance. The bank trimmed its recommendation to “neutral,” calling the move a defensive play related to the potential downside risks in the U.S. credit markets.
On the corporate front, another brokerage firm cut its rating on entertainment firm CIE to “hold” from “buy,” citing the company’s plans for a capital increase.
CIE said it plans to buy the 25% stake that Grupo Financiero Inbursa holds in its CIE Las Americas unit, which operates a racetrack and convention center in Mexico City. CIE plans to fund the purchase through a 1.1 billion peso capital increase.
America Movil remained active, as the company opted out this week of an auction for spectrum in Spain, and acquired a new wireless outfit in Paraguay.
Argentine equities spiked late in the day, following a much-awaited U.S. federal appeals court decision that should allow the government to complete its delayed US$103 billion debt restructuring.
In other news, the central bank has suspended a limit on financial institutions’ foreign currency holdings. The monetary authority has also placed limits on the accumulation of overseas assets for people or entities with foreign debts.
Finally, late yesterday, the Chilean central bank moved to boost interest rates to 3.25%, as inflation is forecast to rise more quickly despite the global macroeconomic slowdown.
Thomson Financial Corporate Group