Brazil Betting Tight Credit Is Ending

Brazilian and Latin American markets moved higher on the day, regaining ground lost in yesterday’s session. Brazil rallied, as investors bet the country’s rate-tightening cycle could soon end, following yesterday’s disappointing GDP report.

Meanwhile, strength in U.S. markets also aided market sentiment in Latin America, particularly in Mexico. Argentina also surged on the day, after Standard & Poor’s upgraded the country’s long-term rating ahead of its imminent debt restructuring.


Brazil’s benchmark Bovespa Index rallied 741.76, or 2.94%, while Mexico’s benchmark Bolsa Index jumped 179.23 points, or 1.38%. Argentina’s Merval Index strengthened 30.62 points, or 2.06%.


Brazilian shares recovered strongly from yesterday’s declines, aided by encouraging U.S. economic data. The Institute for Supply Management index fell to 51.4 in May from 53.3 in April, while the prices paid component fell more than expected.


Despite the decline, a reading over 50 shows growth in the factory sector. The benign report eased some inflation concerns.


In domestic economic reports, Brazil’s Trade and Development Ministry reported a trade surplus of US$ 3.45 billion in May, while exports advanced to US$ 9.82 billion. Still, May’s figure narrowed from US$ 3.88 billion in April, as imports rocketed to US$ 6.37 billion.


On the corporate front, no-frills airline Gol reaffirmed its guidance for 2005 and said it is upbeat regarding the second half of the year. Gol said that passenger traffic rose 46% during last month, compared to the corresponding period a year ago.


Mexican equities rallied on the session, turning around losses incurred during yesterday’s trading. Mexico received encouragement from gains in the U.S., its key trading partner.


In corporate news, transportation firm Grupo TMM SA said that its specialized maritime unit won a five-year US$47.5 million contract with Pemex to lease tankers.


Also, the family of TMM chairman Jose Serrano announced their intentions to purchase a substantial amount of TMM American Depositary Receipts over the next few months.


Elsewhere, Alsea SA, a fast-food franchisee, announced an agreement to purchase Grupo Mozarella SA, which is a franchisee of Domino’s Pizza in Mexico City.


Argentine issues moved higher on the session, as Standard & Poor’s became more upbeat on the country. The ratings agency upgraded Argentina’s long-term sovereign credit rating to “B-” from “selective default,” which had been its rating since its default in late 2001.


The move comes as Argentina nears the completion of its US$ 103 billion debt restructuring, which is expected at the end of this week or early next week.


Elsewhere in Latin America, Venezuela’s consumer prices leapt 2.5% in May, pushing the annual inflation rate up to 17.4%. In early March, the central bank devalued the currency 10.7% to 2,147.3 bolivars to the U.S. dollar.


Thomson Financial Corporate Group – www.thomsonfinancial.com


PRNewswire

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