Corruption News Brings In the Bears in Brazil

Latin American stocks turned lower across the board in a broad-based bout of profit-taking. Brazil led the declines, as the country’s ongoing political scandal resurfaced on investors’ radar.

Meanwhile, Mexican issues receded following three-straight record-breaking sessions. Argentina posted modest declines.


Brazil’s benchmark Bovespa Index plunged 698.42 points, or 2.69%, while Mexico’s benchmark Bolsa Index tumbled 132.46 points, or 0.94%. Argentina’s Merval Index slipped 3.63 points, or 0.25%.


Brazilian shares finally gave into profit-taking, after posting solid gains for four-straight sessions partly due to expectations the central bank may soon cut interest rates.


Also weighing on the market was the latest development in the ongoing alleged bribery scandal related to the governing Workers’ Party.


News that Marcos Valério is attempting to cut a deal by providing evidence to prosecutors in exchange for a lighter sentence concerned investors. Valério allegedly helped funnel money into a PT bribery scheme that encompassed exchanging money for votes in Congress.


Meanwhile, the governing Workers’ Party halted its bill payments until July 19th “when the National Committee will discover the party’s real financial situation.”


The move comes amid allegations that party officials were using money from state-owned firms in exchange for legislative votes.


On the corporate front, aircraft maker Embraer announced last night that it delivered 30 jets during the second quarter, bringing the total delivered so far this year to 60.


Elsewhere, grocer CBD said that its same-store sales rose 1.0% in June from a year ago. Same-store sales, after being adjusted for inflation, declined 5.8% on the year. Brazil’s largest grocer said that ongoing weakness in food sales is to blame for the lackluster results.


Like Brazil, Mexican issues also fell on profit-taking, following three-consecutive record-high closes. Investors’ views are generally positive regarding Mexico’s upcoming second-quarter earnings season.


In corporate headlines, Grupo Televisa said that higher pay television and broadcasting revenues led the media conglomerate to post strong second-quarter results.


The firm’s quarterly sales jumped 6.5% to 7.86 billion pesos from the corresponding period a year ago, while its operating profit surged 16.4% to 2.7 billion pesos. Televisa’s net profit grew to 1.28 billion pesos from 481.6 million pesos a year ago.


Meanwhile, engineering and construction firm ICA announced that its shareholders approved a capital increase of US$ 230 million through the issuance of 1.14 billion new shares. ICA shares fell on the day.


Argentine issues edged lower, a day after investors cheered indications the International Monetary Fund was ready to discuss a new loan accord with the country.


In economic headlines, Torcuato Di Tella University reported that consumer confidence eased 0.2% in July from last month, while confidence was 2.9% higher from a year ago.


Thomson Financial Corporate Group – www.thomsonfinancial.com

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