Brazil Market Back on the Up Track

Latin American markets gained ground, led by Brazilian stocks, amid optimism about the local economy. Mexican shares were also higher, supported by better-than-expected U.S. durables goods data.

Brazil’s benchmark Bovespa Index jumped 442.30 points, or 1.43%, while Mexico’s benchmark Bolsa Index rose 67.52 points, or 0.43%. Argentina’s Merval Index surged 19.29 points, or 1.16%.

Brazilian stocks posted robust gains, following yesterday’s decline, as investors weighed some mixed economic data and positive analyst commentary. In economic news, the São Paulo Federation of Industries, or Fiesp, reported today that industrial activity in São Paulo state rose 0.9% in August from July. However, industrial activity in August fell by 0.4% from a year ago.

On the corporate front, Morgan Stanley, an influential investment bank, raised its price target on Telemar to US$ 22 from US$ 20, saying the company presents the best reward versus risk within Brazil’s telecom sector, which has been "overlooked in this year’s rally."

Meanwhile, mining giant CVRD said it will increase its iron ore shipments to Japan as the company prioritizes major clients such as Japanese steel makers.

Elsewhere, Mexican shares climbed hitting a third straight record closing high. Shares were supported by signs of economic strength in the U.S., which is Mexico’s biggest trading partner. U.S. durable-goods orders rose 3.3% in August, marking the fourth increase in the past five months and the largest gain since May. Economists had expected a much smaller increase of 0.9% last month.

Closer to home, Cemex said it priced a secondary share offering at 53.89 pesos per Mexican share and US$ 49. 50 per American Depositary Share. The equity offering, which is non-dilutive, will be of 27 million ADSs in the form of ADSs and CPO shares, which trade on the Mexican stock market.

Meanwhile, Colombian telephone company Colombia Telecomunicaciones said it has rejected an offer by Telmex to buy a majority of the shares in the state- controlled company. Colombia Telecom said it would consider a potential improved offer from Telmex or seek other potential partners.

In other developments, Mexican airline AeroMexico, which is in the process of being privatized, said it agreed to give its 800 unionized pilots a 3% salary increase. The airline is controlled by Cintra SA.

Argentine issues extended yesterday’s gains, as investors’ cheered data showing construction activity in Argentina jumped 4% in August from July and surged 24.8% from a year earlier.

Thomson Financial Corporate Group – www.thomsonfinancial.com

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