Latin American Market Bounces Back Led by Brazil

Latin American markets reversed course and turned broadly positive today, following steep declines yesterday. Investors also cheered strength in U.S. markets, which benefited from a steep decline in oil prices and stronger-than-expected earnings from tech giants Hewlett-Packard and Applied Materials.

Still, U.S. data showed a surprising surge in producer prices last month. Brazilian issues leapt ahead of the country’s highly anticipated rate decision, which ended up staying at 19.75%. 


Mexican stocks managed to squeak higher, after trading in the red for most of the session. Investors are still digesting the country’s weaker-than-expected GDP report released yesterday. Meanwhile, Argentina turned around, following three-consecutive down sessions.


Brazil’s benchmark Bovespa Index surged 336.02 points, or 1.24%, while Mexico’s benchmark Bolsa Index edged up 1.14 points, or 0.01%. Argentina’s Merval Index jumped 19.86 points, or 1.35%.


Brazilian issues strongly rebounded from yesterday’s declines. Investors during the session were expecting the central bank to keep the reference Selic rate unchanged.


Brazil also benefited from a plunge in oil prices, which finished below US$ 64 a barrel. Brazil is a net importer of crude oil.


Within the telecom group, the Brazilian Court of Audit issued an injunction that prevents U.S.-based Citibank from selling its participation in Brasil Telecom to the pension funds of Petrobras, Banco do Brasil and Caixa Econômica Federal. A final ruling will still need to be issued, however.


Brazil’s biggest grocer CBD announced that its chief executive, Augusto Marques da Cruz Filho, will resign from the post within the next few months to pursue personal interests.


In deal reports, steel manufacturer Group Gerdau bought a 1.5% stake in Columbia’s Diaco for US$ 1.98 million in a public tender offer.


Mexican shares made a late-day comeback, ending nearly flat, following a mostly negative session. Yesterday, Mexico’s Finance Ministry issued a disappointing second-quarter gross domestic product report.


Following the lackluster figure, several investment banks reduced their 2005 forecasts for Mexican growth.


Talks with striking steel workers at Mexico’s Sicartsa plant continued, and a union official said that mining operations should remain normal today.


Grupo Mexico shares continued to weaken, however, as some of the firm’s mining operations have recently been impacted by the work stoppages.


Argentina’s stocks witnessed a recovery today from a recent bout of weakness. On the corporate front, conglomerate Techint completed its public tender offer for shares of Mexico’s Hylsamex. The deal is expected to close next week.


Thomson Financial Corporate Group – www.thomsonfinancial.com

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