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In Brazil Investors Snub Oil Price Hike

Brazilian and Latin American markets mostly advanced on the day, although Argentina moved lower. Investors largely ignored another advance in crude oil, which put prices securely above US$ 60 a barrel.

Traders are awaiting the U.S. FOMC meeting on interest rates later this week.

Brazil’s benchmark Bovespa Index jumped 308.86 points, or 1.24%, while Mexico’s benchmark Bolsa Index advanced 155.45 points, or 1.17%. Argentina’s Merval Index declined 23.36 points, or 1.62%.

Brazilian shares added to Friday’s positive momentum, after spending most of last week in the red due to political and oil concerns.

Today, investors mostly ignored fresh revelations over the weekend regarding the country’s political scandal that involves the governing Workers Party.

Brazilian magazine Isto í‰ reported that about 20 million reais (US$ 8.4 million) were withdrawn through companies owned by Marcos Valério, an associate of the Workers Party. The withdrawals were made during the alleged period bribery is said to have taken place.

In economic reports, the central bank reported a consolidated public-sector primary budget surplus of 6.314 billion reais in May, lifting the 12-month primary budget surplus to 93.17 billion reais, or 5.02% of gross domestic product (GDP).

Still, the nominal monthly deficit, which includes interest payments on debt, was 7.4 billion reais in May, compared with a surplus of 3.06 billion reais in April and a deficit of 4.84 billion reais in the year-earlier period.

Separately, the central bank’s weekly market survey continued to show a decline in domestic inflation and growth rates for 2005.

Turning to corporate reports, state-run oil firm Petrobras announced that it does not intend to raise its domestic gasoline and diesel prices in the short term, despite the recent surge in global oil prices.

Petrochemicals firm Braskem said that it, along with Venezuela’s state- owned Pequiven, may build a petrochemicals plant in Venezuela that may cost up to US$ 250 million and produce about 400,000 tons of polypropylene a year.

Elsewhere, Cemig expects to raise 2.22 billion reais in bank loans to roll over debts. The electric power utility said the move could warrant a better credit rating, which in turn could reduce the cost of borrowing.

Mexican shares snapped a four-session losing streak and posted gains. In economic headlines, the National Statistics Institute, or INEGI, reported that its global indicator of economic activity, or IGAE, grew 4.8% in April compared to a year earlier and was down 0.03% from March.

In corporate research notes, a major investment bank resumed coverage of bottler Femsa with an “overweight” rating.

Elsewhere, broadcaster TV Azteca and other firms controlled by Ricardo Salinas Pliego will likely see the end to their ADRs being traded on July 18. Recently, the firms decided to delist from the New York Stock Exchange due to the high costs.

Argentine receipts bucked the broader market upturn and posted declines. Chief of Cabinet Alberto Fernandez rejected the International Monetary Fund’s recommendation that Argentina raise its fiscal surplus.

Meanwhile, the national statistics agency, or INDEC, said that domestic construction activity grew a seasonally adjusted 2.3% in May from April and advanced 8.9% from the corresponding period a year ago.

Thomson Financial Corporate Group – www.thomsonfinancial.com


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