Latin American shares rose across the board; although, it was a Brazilian rally that captured most of the attention.
Brazilian shares were sharply lower ahead of key testimony regarding bribery accusations involving President Lula’s Workers Party, but surged after the testimony failed to reveal any solid proof regarding the allegations.
Mexican and Argentine shares also posted solid gains.
Brazil’s benchmark Bovespa Index rallied 842.41 points, or 3.38%, while Mexico’s benchmark Bolsa Index advanced 43.51 points, or 0.33%. Argentina’s Merval Index jumped 14.03 points, or 0.99%.
Brazilian issues strongly rebounded, following an early plunge, amid the latest development in the country’s political scandal.
Roberto Jefferson, chairman of the Brazilian Labor Party and a key figure in launching allegations of bribery against select governing Worker’s Party members, provided testimony before the Lower House Ethics Committee.
Jefferson said he had no proof of his allegations, which traders took as a positive for President Luiz Inácio Lula da Silva’s government and its push for more reforms in the country.
Meanwhile, investors are also awaiting the outcome of the central bank’s monetary policy meeting, which kicked off today and is scheduled to finish tonight.
Most economists predict the central bank will end its rate-tightening cycle and leave the country’s reference Selic interest rate at 19.75%.
Separately, the government’s IBGE statistics institute said that retail sales volume jumped 3.4% in April on a year-over-year basis. Retail sales fell 0.23% in April from March.
In corporate news, AmBev was active, after the drinks firm’s parent company, Belgium-based InBev, announced its intention to spend up to 500 million euros to purchase more AmBev preferred shares.
Also, Embraer signed a US$ 140 million contract with India’s Paramount Airways to provide it with five passenger aircraft.
Meanwhile, Brazil’s largest domestic airline, TAM, said it is in final discussions to buy 20 planes from Airbus, which will likely include options to buy an additional 20 aircraft.
Mexican receipts remained positive. In corporate reports, beverage firm Femsa reported last night that its first recycling plant for PET plastic bottles should be active in about a month.
Also, broadcaster Grupo Televisa’s annual report filed with the U.S. Securities and Exchange Commission indicated that the Mexican Antitrust Commission is investigating alleged antitrust violations regarding claims Grupo Televisa refused to provide television signals to a cable provider.
Banking group Banorte posted gains, after the firm announced yesterday that it received 1 billion pesos in tax refunds following a favorable court reading regarding value-added tax law changes.
Argentine receipts followed the broader Latin American markets into the black. Domestic traders have recently been reluctant to commit to the market amid neighboring Brazil’s political woes. Traders are also preparing for the expiration of options contracts, which start on Thursday.
Thomson Financial Corporate Group – www.thomsonfinancial.com