Brazil Rises Anticipating Interest Cuts

Latin American markets ended mixed. While profit-taking and weakness in the U.S. weighed on Mexican shares, upbeat sentiment about the interest rate outlook lifted Brazilian equities.

Brazil’s benchmark Bovespa Index leapt 218.91 points, or 0.80%, while Mexico’s benchmark Bolsa Index tumbled 319.00 points, or 2.23%. Argentina’s Merval Index jumped 5.42 points, or 0.34%.


Brazilian shares rose on mildly pleasing economic news, and little corporate or political developments. The country’s General Price Index fell 0.65% in August, following a 0.34% decline the prior month, and compared with expectations for a drop ranging from 0.45% to 0.62%.


The report boosted expectations that the central bank will soon cut interest rates. Investors are also upbeat ahead of Wednesday’s GDP report, which is expected to be bullish.


Meanwhile, the central bank’s president reaffirmed its commitment to the bank’s inflation target of 5.1% for 2005.


Separately, the Brazilian Planning Ministry’s research arm may soon up its forecast for 2005 GDP growth, according to news services. The current forecast is for growth of 2.8%.


Mexican issues, meanwhile, fell sharply, due to profit taking and in sympathy with U.S. counterparts. Robust oil prices weighed on the North American market.


Also, U.S. factory orders declined in July, but less than expected, the Commerce Department reported. The decline of 1.9% was less than the predicted 2.2% shrinkage, though it still was the highest since April 2004.


On the bright side, the U.S. consumer confidence index rose to 105.6 from 103.6 in July, surpassing forecasts of 101.0.


Adding pressure, U.S. Dow component Wal-Mart fell sharply on news the company had to close some stores in areas affected by Hurricane Katrina.


In domestic corporate news, Cemex was in focus on reports that U.S. and Mexican authorities may soon resolve their dispute over import duties on cement from Mexico, amid a growing cement shortage in the U.S.


On the research front, an investment bank rated homebuilder Homex SA at “overweight” with a price target of US$ 36.


Argentine stocks posted modest gains, amid little news. Meanwhile, in Chile, July retail sales climbed 4.9%, versus a 5.4% increase in June.


Thomson Financial Corporate Group – www.thomsonfinancial.com

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