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Brazil Gets an Upgrade from Fitch and Market Gets a Boost

Latin American markets were mixed, with Brazilian shares posting solid gains, as a sovereign rating upgrade added to optimism about the economy. Meanwhile, Mexican shares dipped amid concerns about the U.S. economy, amid rising oil prices.

Brazil’s benchmark Bovespa Index rallied 337.01 points, or 1.11%, while Mexico’s benchmark Bolsa Index fell 21.04 points, or 0.14%. Argentina’s Merval Index declined 11.94 points, or 0.72%.

Brazilian shares advanced, as investors were cheered by news that Fitch Ratings revised its Brazilian sovereign rating to "positive" from "stable."

Fitch said the upgrade reflects "the country’s favorable trends in the balance of payments and external debt dynamics, as well as substantial progress in moderating inflationary pressures, holding out the prospect of lower real interest rates and underpinning future growth prospects."

Adding to positive sentiment, miner CVRD achieved investment-grade ratings from credit-rating agency Standard & Poor’s. S&P granted CVRD’s local and foreign currency corporate debt a rating of BBB, with a stable outlook. Earlier this year, Fitch Ratings and Moody’s Investors Service also awarded CVRD investment-grade ratings.

Elsewhere, Mexican shares were mixed to lower, in line with the U.S. market, as rising oil prices stoked concerns about higher inflation and interest rates in the U.S. Mexico’s economic health is tied closely to that of the U.S. since Mexico sends the vast majority of its exports north of the border. Shares were also hampered by caution ahead of U.S. consumer price and retail sales data due out on Friday.

However, recent optimism about Mexico’s third-quarter earnings season helped to limit losses. Home builder Geo said yesterday that it expects to report third-quarter home sales between 9,400 and 9,700 units later this month. Net profit will be about 30% higher than in the year-ago quarter, the company added.

Argentine shares dropped as investors returned from a long holiday weekend. Shares have been pressured recently by domestic inflation concerns and uncertainty over the outcome of upcoming congressional elections.

In a bid to ease inflation jitters, Argentine Economy Minister Roberto Lavagna said today that October inflation appears to be declining on improved weather, which has helped to lower fruits and vegetable prices.

"I don’t have data for October, although there are climatic factors that are helping temper seasonal increases" seen last month, Lavagna said. Inflation rose a bigger-than-expected 1.2% in September from the previous month.

Thomson Financial Corporate Group – http://www.thomsonfinancial.com

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