Brazil Forgets Politics and Keeps Its Stock Winning Streak

Latin American markets continued their collective upward advance for a second-straight session. Brazil powered higher, as investors chose to concentrate on the country’s corporate developments, rather than the ongoing political scandal.

Meanwhile, Mexican shares continue to benefit from a largely positive earnings season, while Argentine stocks are moving higher ahead of the country’s financial releases. U.S. shares were firmly higher today, on upbeat economic reports and robust July sales data from the auto sector.


Brazil’s benchmark Bovespa Index surged 490.47 points, or 1.87%, while Mexico’s benchmark Bolsa Index jumped 95.16 points, or 0.65%. Argentina’s Merval Index leapt 12.80 points, or 0.84%.


Brazilian shares continued their winning streak. In the latest testimony regarding the country’s alleged cash-for-votes scheme, former chief of staff José Dirceu denied any involvement in the scandal.


Meanwhile, local newspaper Folha de S. Paulo reported that at least 18 members of Congress who are allegedly linked to the bribery scheme may resign from the Chamber of Deputies. Yesterday, Congressman Waldemar Costa Neto became the first to resign.


The financial sector was active today. Banco Itaú, Brazil’s second-largest private bank, posted a jump in its second-quarter net profit to 1.33 billion reais from 949 million reais a year ago, primarily due to the expansion of its credit portfolios. The firm’s total assets grew to 144.55 billion reais from 122.76 billion reais a year earlier.


Meanwhile, Banco Bradesco, the country’s largest private bank, signed a memorandum of understanding with retailer Lojas Colombo to provide its customers with consumer credit services. Bradesco signed a similar agreement with Lojas Leader last week.


In other financial releases, no-frills airline Gol said that higher fuel costs and strong price pressures overshadowed the firm’s surge in revenue during the second quarter.


The firm’s quarterly net profit was nearly flat at 73.4 million reais from 73.2 million reais a year ago, while net revenue leapt to 562.2 million reais from 385.5 million reais.


Gol’s earnings before interest, tax, depreciation, amortization and aircraft rental costs edged up 6% to 155.7 million reais from 146.9 million reais.


Mexican shares added to yesterday’s strong performance in the wake of a mostly positive earnings season in the country. U.S. markets also ended positively, adding to upbeat domestic investor sentiment, as the U.S. is a key trading partner of Mexico.


State-run oil firm Pemex said that its trade surplus widened by 22% to US$10.19 billion in the first half of the year, bolstered by strong crude oil prices.


Turning to research news, a major investment bank initiated coverage on copper miner Grupo Mexico with a “buy” rating. The bank commented that Grupo Mexico’s shares are trading at a discount to their peers. Grupo Mexico shares advanced on the news.


Argentina’s Merval stock index reached a four-month high today, as investor optimism abounds ahead of the country’s second-quarter earnings season. Trading volume has also picked up in recent days.


Thomson Financial Corporate Group – www.thomsonfinancial.com

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