U.S. High Interests Rates Weigh on Brazil Stocks

Latin America continued to suffer from ongoing global inflation fears and concerns that U.S. interest rates will continue to rise for some time. Brazilian investors also had an outbreak of foot-and-mouth disease to contend with in the state of Mato Grosso do Sul, a key cattle-raising state in the country.

Brazil’s Bovespa Index tanked 734.19, or 2.40%. Mexico’s benchmark Bolsa Index fell 178.43 points, or 1.18%, while Argentina’s Merval Index declined 18.47 points, or 1.15%.

Brazilian shares sank, amid enduring inflation worries, including at home. The consumer price index in Sao Paulo rose 0.59% in the four weeks ended October 7, versus 0.44% in the prior reading, at the high end of forecasts ranging from 0.50% to 0.61%.

In corporate reports, mining firm CVRD said that it is not considering raising its bid for Canada’s Canico Resource, following the nickel miner’s recommendation to shareholders to reject CVRD’s offer. Canico’s board of directors believes the Cdn$ 17.50 (US$ 14.79) per share offer undervalues the firm.

On the credit front, Fitch revised its rating outlook on several Brazilian banks to "positive" from "stable," following a similar move recently made on Brazil’s sovereign rating.

Mexican shares followed a similarly negative pattern to Brazil. The country’s National Association of Supermarkets and Department Stores said that sales surged 9.5% in September from the corresponding period a year ago.

Same-store sales advanced 1.3% last month. Elsewhere, TV broadcaster Grupo Televisa is reportedly in talks with Spain’s Globomedia to collaborate in an upcoming auction for license to launch a commercial TV channel in Spain.

In upbeat research, a major investment bank noted that America Movil seems to have signed on a large number of new subscribers in Colombia in the third quarter, suggesting the firm will continue to outperform rival Telefonica Moviles from Spain.

Separately, the same bank restarted conglomerate Alfa at "overweight," due in part to solid assets and attractive valuation, among other factors.

Elsewhere, Argentine shares eased back, in tune with regional and other emerging markets, caught in ongoing worries about higher U.S. inflation and interest rates. Of note, in local data, consumer confidence rose 0.4% in September, and 1.4% from a year ago, versus a 4.1% decline in September.

Thomson Financial Corporate Group –
www.thomsonfinancial.com

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