News of Lula’s Waning Popularity Depresses Brazil Stocks

Latin American markets drifted lower for the most part, due to weakness in the U.S., political concerns in Brazil and a disappointing outlook from Mexico’s Cemex.

Brazil’s benchmark Bovespa Index fell 247.28 points, or 0.85%, while Mexico’s benchmark Bolsa Index dropped 102.88 points, or 0.68%. Argentina’s Merval Index eased 1.43 points, or 0.09%.


Brazilian shares declined, following a poll showing waning popularity for the government, and amid jitters ahead of tomorrow’s central bank meeting. Analysts widely expect an interest rate cut, and any decision of the bank to keep rates steady would be considered bearish.


On the political front, a poll showed that support for President Lula fell to 50% from 59.9% in July. In addition, the Lower House ethics committee will open a probe tomorrow into corruption allegations against Lower House Speaker Severino Cavalcanti, reported news services.


In other data, the consumer confidence index for São Paulo dropped 16.6 points to 109.5 in September, the first time since April 2004 that the index was below 110.


Mexican issues, meanwhile, retreated as well, due to soft industrial production data released yesterday, and in line with U.S. counterparts.


Fears of inflation and a disappointing earnings report from consumer electronics retailer Best Buy, which generated concerns that the high oil prices may be curbing consumer discretionary spending, pressured stocks north of the border.


In U.S. economic data, the producer price index rose 0.6% in August, versus 1.0% the prior month, and compared to expectations for an increase of 0.8%.


Analysts shrugged off the report, as it predates the surges in oil prices caused by Hurricane Katrina. In other reports, the trade gap shrunk to US$ 57.94 billion in July from US$ 59.49 billion in June, versus predictions for an increase to US$ 60 billion.


In company news, Cemex released preliminary third-quarter results late yesterday. The firm expects earnings before interest, taxes, depreciation and amortization close to US$ 1 billion in the period, up about 50% from the prior year. Sales are seen doubling to US$ 4.4 billion, largely due to the acquisition of U.K.-based RMC Group.


The stock fell, as analysts’ reactions to the news was mixed, with an investment bank noting soft demand in Mexico, Spain and the U.K. Separately, Cemex also announced a non-dilutive secondary share offering.


In labor news, Grupo Mexico’s Asarco unit reported late yesterday that striking union workers at its copper operations in Arizona and Texas had rejected its latest labor contract offer. In addition, Southern Peru Copper Corp., in which Grupo Medico has a stake, warned of weak sales in 2006 due to falling mined metal prices.


Argentine stocks traded sideways for most of the session, in light volume, amid little developments. Of note, in the corporate front, Telecom Argentina filed for creditor protection in the U.S. to protect its assets from creditors who haven’t signed off on the company’s debt restructuring.


Thomson Financial Corporate Group – www.thomsonfinancial.com

Tags:

You May Also Like

Lula Sees Peace and Harmony Between Colombia and Venezuela

After meeting with the president of El Salvador, Mauricio Funes, at the Industrial Federation ...

Brazil Fears no Blackouts or Brownouts At Least Up to 2010

Brazil does not face the risk of running short of electric power, either for ...

Brazilian Army in Rio de Janeiro, Brazil

Rio, Brazil’s Most Violent City, Calls Army to the Rescue

Brazilian Governor Sergio Cabral Filho has formally requested that Brazil's army intervene to contain ...

A Final Push to Nab Nazi War Criminals Hidden in Brazil and South America

The Simon Wiesenthal Center, a prominent Jewish rights group, has launched Operation Last Chance ...

Foreign Investment in Brazil More than Doubles to US$ 31 Billion

The Brazilian Central Bank disclosed this Wednesday, November 28, that Foreign direct investment (FDI) ...

Tolerance Is Brazil’s Both Bane and Blessing

Among certain sectors of Brazilian society, there seems to be a tangible sense of ...

Brazil Counting on 1.2 Million Tourism Jobs in 5 Years

The Brazilian tourism sector should generate 1.2 million direct and indirect jobs in Brazil ...

Light and Shadow

Ten years ago Brazil had no public policy towards its youth. This July the ...

Foreigners Cash Out US$ 1.8 Bi, But Brazil Bets They’ll Buy US$ 26 Bi in Stocks

Brazil reached last year a record US$ 34.6 billion (almost double the US$ 18.7 ...

The Indian

Sitting on the Turkish bed the traveler unbuttoned his shirt, loosened the belt, looked ...