Brazilian Market Soars Anticipating Good News in the Interests Front

Latin American stocks were supported by a strong jump in Brazilian shares and impressive gains in Mexico. U.S. markets also moved higher, as oil prices receded further and amid congressional testimony from U.S. Federal Reserve Chairman Alan Greenspan.

Greenspan indicated the U.S. economy remains strong; although, interest rates are still poised to rise at a measured pace. Meanwhile, Brazil’s Central Bank is set to release its decision on interest rates today after the close.


Brazil’s benchmark Bovespa Index surged 434.16 points, or 1.72%, while Mexico’s benchmark Bolsa Index jumped 138.55 points, or 0.98%. Argentina’s Merval Index slipped 4.37 points, or 0.29%.


Brazilian shares soared ahead of the central bank’s decision on interest rates. The majority of economists expect the bank to hold the Selic base rate steady at 19.75%.


Meanwhile, local steelmakers were a positive standout, as China posted a strong GDP report for the second quarter. China is a major importer of commodities.


In other economic reports, the Getúlio Vargas Foundation reported that the General Price Index, or IGP-M, fell 0.25% in the 10 days through July 20. Prices declined 0.38% during the same period in June.


Separately, São Paulo’s Fipe research institute said that consumer prices in São Paulo held steady in the four weeks ended July 15, compared to a 0.13% slide in the four weeks ended July 7.


Within the energy group, CVRD announced last night that it has entered into a partnership with Australia’s Aquila Resources to potentially develop the Belvedere coal project in Queensland. After an 18-month study, CVRD will have the option to acquire 51% of the project.


Also, Agência Brasil announced that Brazil’s Petrobras and Venezuela’s PdVSA will construct a US$ 2.5 billion oil refinery in the Brazilian state of Pernambuco. The refinery will process heavy oil with the capacity to produce 250,000 barrels per day.


In other corporate news, beverages firm AmBev today targeted 5% growth in domestic sales for 2005. Previously, the firm announced a 14.3% jump in second-quarter domestic beer sales volume from a year ago, while soft drink sales climbed 10.1% in the quarter.


Elsewhere, TAM, Brazil’s largest domestic airline, announced that it raised more than expected from its primary and secondary share offers from earlier in the year.


The firm initially reported raising US$ 232.5 million (543.4 million reais), but raised the total to US$ 234.8 million (548.5 million reais) due to a supplementary share offering amid heavy demand.


Mexico posted another record-breaking high session, as investors anticipate a healthy earnings season. Cement titan Cemex is scheduled to release its quarterly financial report tomorrow.


Meanwhile, broadcaster TV Azteca last night reported an 8% jump in its second-quarter net profit to 497.4 million pesos, as sales leapt to 2.20 billion pesos from 2.06 billion pesos a year ago. Sales growth was aided by strength in its programming. EBITDA advanced 7% to 1.04 billion pesos.


Argentine shares turned mildly lower, despite encouraging economic growth estimates for the country. The national statistics agency, or INDEC, said its estimate of economic activity rose to a seasonally adjusted 10.5% rate in May versus a year ago and rose 0.6% from April. INDEC also upwardly revised its April reading to show a 10.1% advance year-over-year.


Thomson Financial Corporate Group – www.thomsonfinancial.com

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