Brazilian Market Ends Rush Up Touched by US News and Oil Prices

Latin American markets were mixed, as Mexico was fueled by some key earnings reports, while Brazil ebbed following three-straight positive sessions.

Some mixed U.S. economic reports also curtailed investors’ enthusiasm. Argentina ebbed, before its earnings season begins in earnest next week.


Brazil’s benchmark Bovespa Index ebbed 26.01 points, or 0.10%, while Mexico’s benchmark Bolsa Index surged 152.82 points, or 1.07%. Argentina’s Merval Index eased 3.57 points, or 0.24%.


In U.S. economic reports, gross domestic product rose 3.4% in the second quarter after growing 3.8% in the previous quarter. Economists had forecast second-quarter growth of 3.4%.


Meanwhile, the Chicago Purchasing Managers index rose to 63.5 in July from 53.6 in June. Also, the University of Michigan’s consumer sentiment index was said to have shown a reading of 96.5 in July, in line with the preliminary reading and up from 96.0 in June. Economists had predicted a reading of 96.5.


Brazilian shares gave up earlier gains and turned lower. Contributing to the market’s demise was weakness in the U.S. and a rise in crude oil prices to above US$ 60 a barrel.


Brazil is a net importer of oil. A bout of profit-taking may also have contributed to Brazil’s decline, as the market had strongly advanced for three-straight sessions.


In economic reports, the central bank reported that the government’s primary budget surplus rose to 9.62 billion reais in June from 6.3 billion reais in May.


The 12-month surplus through June 30th totaled 94.9 billion reais, or 5.08% of gross domestic product. The government’s target surplus for 2005 is 4.25% of GDP.


Turning to the latest financial releases, Energias do Brasil posted a stronger second-quarter net profit of 198 million reais, compared to 13.5 million reais in the corresponding period a year ago.


The electric power holding firm’s net revenue advanced to 1.085 billion reais from 893.4 million reais last year, while EBITDA was 237.7 million reais, up from 183.1 million reais.


Mexican shares received a serious boost from an upbeat earnings report from local bellwether America Movil. Last night, wireless phone firm America Movil more than doubled its second-quarter net profit to 7.90 billion pesos from 3.19 billion pesos, while operating profit edged up to 6.74 billion pesos from 6.36 billion pesos.


Sales jumped to 42.59 billion pesos from 31.89 billion pesos, while EBITDA advanced to 11.80 billion pesos from 10.73 billion pesos. The firm also reported a record 7.4 million mobile subscriber additions during the second quarter, which bolstered its total client base to 73.8 million users. The firm is also raising its capital expenditure plans for the year to approximately US$3 billion.


Elsewhere, state oil firm Pemex said that record high oil prices led the firm to post a second-quarter net profit of US$ 200 million, reversing a year-earlier loss of US$ 2.63 billion. Revenue jumped 14% to US$ 20.5 billion.


In research notes, a major investment bank upgraded bottler Coca-Cola Femsa to “outperform” from “peer perform” and raised its parent firm Femsa’s price target to US$ 94 from US$ 70. The bank was upbeat on the bottler partly due to a better outlook for its industry worldwide and its second-quarter growth.


For Femsa, the bank believes the firm will take advantage of the summer and holiday period to gain “incremental pricing in select packages and brands and drive revenue per case.”


Argentine shares were mixed to lower on the session, ahead of the country’s earnings season. Solvay Indupa’s shares slumped, despite the petrochemical producer’s stronger first-half results.


The firm’s net profit advanced to 94.7 million pesos from 36.1 million pesos in the corresponding period a year ago, while net sales jumped to 770.5 million pesos from 600 million pesos. The firm’s pre-tax profit rose to 164.7 million pesos from 71.9 million pesos.


Thomson Financial Corporate Group – www.thomsonfinancial.com

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