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Brazil Market Sputters Ahead

Brazilian and Latin American markets were in the black, but pulled back from earlier highs toward the end of today’s session. Investors cheered a recession in record-high crude oil prices, which also greatly benefited U.S. shares.

Brazil and Mexico added to yesterday’s gains, while Argentina continued to drift south on low volume.


Brazil’s benchmark Bovespa Index advanced 35.27 points, or 0.14%, while Mexico’s benchmark Bolsa Index rose 68.34 points, or 0.51%. Argentina’s Merval Index gave up 1.61 points, or 0.11%.


In major U.S. economic reports, the consumer confidence index jumped to a three-year high of 105.8 in June from a revised 103.1 in May. Economists had expected confidence to climb to 105.0.


Brazilian issues continued to advance, alongside confidence in U.S. markets. A decline in crude oil prices also comforted investors, as Brazil is a net importer of the commodity.


In corporate news, a U.S. federal bankruptcy court handed down a preliminary injunction that prevents creditors from seizing Varig’s leased aircraft.


A hearing is set for September 12 to review the preliminary injunction, as long as the air carrier continues to maintain the necessary payments on the aircraft.


Meanwhile, a major investment bank lifted its price target on state-run oil firm Petrobras to US$ 62 from US$ 51, as it believes the firm’s fundamentals will remain strong next year.


Turning to deal reports, flat-steel maker Usiminas said it may purchase at least 10% in of the steel firm being formed by Argentina’s Techint.


The new firm, which will include Techint’s recently acquired Hylsamex, will be Latin America’s largest steel producer with annual revenues reaching US$ 5 billion.


Mexican issues continued their upward momentum today, bolstered by a strong consumer confidence reading in the U.S., as that country is a critical trading partner for Mexico.


Also, Finance Minister Francisco Gil Diaz said the Mexican economy is set to meet the government’s 2005 growth target of 3.5% to 4%.


Airline holding company Cintra surged, as a brokerage initiated coverage on the firm with a “buy” rating. The government plans to launch a tender process for Cintra’s privatization, beginning in early July.


Also, Cemex announced that beginning tomorrow, trading in its Ordinary Participation Certificates and American Depositary Shares will reflect its previously announced stock split.


Argentine shares turned downward late in the session on low volume. Investors had a batch of economic reports to contend with. Economy Minister Roberto Lavagna announced last night that Argentina will commence talks with the International Monetary Fund regarding a new financial accord on July 16.


Indec, the national statistics agency, said that the final reading for industrial production showed an 8.5% jump in May from the year-earlier period and a 1.2% advance from April. May’s capacity utilization rate edged down to 70.6% from 70.9%.


Meanwhile, Argentina’s formal private sector employment rate advanced 0.8% in May and 8.8% from the year-earlier period. Separately, Torcuato di Tella University reported that confidence in the local government declined 3% in June from last month. The most recent decline brings the confidence index down to 2.31 from 2.37 in May.


Thomson Financial Corporate Group – www.thomsonfinancial.com

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