US Market Rises. Brazil Follows the Leader.

Latin American markets rose alongside U.S. market strength. Receding crude oil prices helped boost U.S. shares. Meanwhile, Brazilian issues surged, as investors await results due out after the close from state-run oil firm Petrobras and Wednesday’s meeting on interest rates.

Elsewhere, Mexico reached yet another record close. Argentina’s market was closed for a holiday.


Brazil’s benchmark Bovespa Index surged 424.28 points, or 1.57%, while Mexico’s benchmark Bolsa Index jumped 169.48 points, or 1.16%.


Brazilian issues added to last Friday’s late-day rally, aided by foreign fund buying. Investors are awaiting this Wednesday’s rate decision by the Brazilian Central Bank, which is expected to keep the reference Selic rate unchanged at 19.75%.


Meanwhile, the central bank’s weekly survey of economists showed yet another decline in 2005 inflation expectations to 5.40% from the 5.50% prediction given last week.


In earnings releases, Embraer reported late last Friday that its second-quarter net profit was hurt by the appreciation of the Brazilian real and reduced sales to commercial airlines.


The aircraft manufacturer posted a second-quarter net profit of 166.7 million reais, down from 382.1 million reais a year ago, while net revenue slumped to 1.935 billion reais from 3.034 billion reais.


EBITDA fell to 204.0 million reais from 617.2 million reais. Separately, the firm said today that it expects improved performance in the second half of this year due to a “stabilization of the local currency.”


Elsewhere, airline Varig posted a narrower second-quarter net loss of 342.4 million reais from 393.9 million reais in the corresponding period a year ago. Net revenue fell slightly to 2.019 billion reais from 2.095 billion reais.


Turning to the banking sector, Banco do Brasil said that its net profit for the second quarter jumped to 1.014 billion reais from 805 million reais a year ago. Gross financial service revenue climbed to 2.77 billion reais from 2.42 billion reais.


Meanwhile, net financial service revenue advanced to 1.929 billion reais from 1.643 billion reais. The government-controlled bank credited an expansion of its credit portfolios for the stronger figures.


Within the telecom sector, a major investment bank upgraded Brazil’s wireless sector to “market overweight” from “market weight,” as it sees competitive pressure easing. The bank expects capital inflows to benefit firms such as Telesp Celular, Telemig Celular and Tim Participações.


Mexican shares also enjoyed a solid advance on the back of strength from U.S. markets. The National Statistics Institute, or Inegi, said that the country’s gross domestic product grew 3.9% in the second quarter, following a 2.4% advance in the first quarter.


Cement maker Cemex was active, after ratings agency Moody’s upgraded its senior unsecured notes to Baa3 from Ba1, as the company’s management continues to reduce near-term debt refinancing risk.


Within the retail group, the National Association of Supermarkets and Department Stores, or Antad, said that strength in consumption led to a 10.8% surge in July sales at its member firms, compared to the corresponding period a year earlier. Same-store sales grew 3.1% from last year.


Thomson Financial Corporate Group – www.thomsonfinancial.com

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