Latin American markets took a hit after posting solid gains yesterday. Brazilian shares fell, following a weaker-than-anticipated reading on first-quarter gross domestic product that raised concerns about the impact high interest rates are having on the economy. Mexican and Argentine equities also slumped.
Brazil’s benchmark Bovespa Index fell 217.15, or 0.85%, while Mexico’s benchmark Bolsa Index lost 197.39 points, or 1.50%. Argentina’s Merval Index declined 12.29 points, or 0.82%.
Brazilian shares sank, after posting solid gains yesterday, as the market reacted to some disappointing economic news.
The first-quarter expansion in gross domestic product slowed more than expected, raising fears that sky-high interest rates are having an adverse impact on growth.
Growth was recorded at 2.9% in the quarter, compared with forecasts for 3.5% and the 4.7% reading from the fourth quarter.
In corporate news, steel maker Gerdau was active after the company’s shareholders approved a plan yesterday to repurchase 7.15 million preferred shares of Metalurgica Gerdau’s outstanding stock and 6.5 million preferred shares of Gerdau’s outstanding stock. The buyback will last 30 days starting today.
Out of Mexico, the market dipped, reacting to weakness on Wall Street, after the U.S. reopened from the long holiday weekend. There was little in the way of economic or corporate news to help direct trading, so market participants took their cues from the action on Wall Street.
Mexico’s mining production slipped 0.3% in March from the year ago, amid a 7.6% decline in the output of silver, the National Statistics Institute, or INEGI, reported.
Cintra continued its rally, after the airline holding company said last week that it hopes to start receiving bids for the airlines it manages in June. The sale of airlines AeroMexico and Mexicana marks Mexico’s largest privatization in years.
Also, corn miller and tortilla maker Gruma SA said it has purchased three plants from Minnesota-based Cenex Harvest States, or CHS Inc. Terms of the deal were not released.
Turning to Argentina, the market moved lower, as investors continue to await the finalization of the country’s US$103 billion debt restructuring. Additionally, the government reported that the trade surplus narrowed to US$1.18 billion in April, compared with $1.389 billion a year earlier, amid an acceleration in import growth.
On the corporate front, Spanish-Argentine oil firm Repsol-YPF said that it will spend more than 21.1 billion euros within the next five years as it expands its upstream businesses. The company also plans on reducing costs over the next five years.
Thomson Financial Corporate Group – www.thomsonfinancial.com