Interest Hike Depresses Brazilian Stocks

Latin American shares were mostly mixed on the session, as traders were hesitant to put further money into the markets following recent strength. Brazil’s central government raised the reference Selic rate for the ninth-straight time, disappointing some market pundits that were hoping for an end to the tightening cycle.

Meanwhile, Mexico continued to benefit from Alfa’s agreement to sell Hylsamex. Elsewhere, Argentine issues ebbed, as the economy showed slowing growth in March.

Brazil’s benchmark Bovespa Index negated 69.11 points, or 0.28%, while Mexico’s benchmark Bolsa Index jumped 67.59 points, or 0.53%. Argentina’s Merval Index slipped 2.09 points, or 0.14%.

Brazilian shares returned some of the gains they recently earned, after the central bank lifted the base Selic interest rate to 19.75% from 19.50%. The move marks the ninth-straight hike in rates. Economists were mixed in their views as to what the central bank would do.

In corporate reports, New York’s Southern District Court maintained a temporary restraining order on a deal between Telecom Italia and Banco Opportunity regarding control of Brasil Telecom.

Citigroup, which is also part owner of Brasil Telecom, requested the restraining order. The U.S. court is set to make a decision on the restraining order by June 2.

Within the airline group, Brazilian airline Varig and TAP Air Portugal could reach an investment deal within the next three weeks, according to domestic newspapers. Part of the deal would entail TAP acquiring up to 20% in Varig.

Meanwhile, Mexican shares were more positive on the session, as Alfa’s sale of Hylsamex continues to bolster domestic issues. Last night, Alfa said it would sell its 42.5% stake in Hylsamex to Argentina’s Techint Group in a deal that values the steel unit at US$ 2.25 billion.

Alfa will receive approximately US$ 958 million for its stake. The offer for 100% of Hylsamex will be extended to holders of Hylsamex class B and class L shares.

Turning to research news, a major investment group reduced its earnings estimates for wireless phone company America Movil due to higher costs related to subscriber growth. Nevertheless, America Movil strengthened on the session.

On the economic front, the National Statistics Institute, or INEGI, said that retail sales advanced 4.4% in March, compared to the year-ago figure. The latest result was also slightly above February’s reading.

Argentine shares edged lower, as investors continue to seek further clarity as to when the government will conclude its US$ 103 billion debt swap.

Meanwhile, Indec, the national statistics agency, reported that March’s gross domestic product advanced 0.3% from the prior month. Still, the year-over-year rate fell to 7.5% from the prior 8.5% annualized rate in February.

In further deal news, following Techint’s announcement of its purchase of Hylsamex, the firm said that two of its units are set to buy Acindar’s steel tube assets, which are valued at about US$83.2 million

Thomson Financial Corporate Group



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