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Higher Energy Prices Lead Brazilian Markets Down

Latin America remained in the red, dragged lower by Brazil. Mexico was also under pressure, while Argentina bounced higher. Benign core U.S. inflationary data initially boosted Latin America, but then steep declines in U.S. industrial production, coupled with some disappointing Brazilian sales data, pressured the region.

Brazil’s Bovespa Index declined 109.82 points, or 0.37%. Mexico’s benchmark Bolsa Index fell 31.85 points, or 0.21%, while Argentina’s Merval Index rebounded 17.62 points, or 1.11%.

Brazilian shares remained uneasy today amid mixed U.S. economic releases. U.S. consumer prices soared 1.2% in September due to high energy prices, while the core index, which strips out food and energy items, only edged up 0.1%.

In separate U.S. reports, consumer sentiment and industrial production declined. Meanwhile, investors are preparing for this coming Wednesday’s central bank meeting in which an interest rate cut is expected.

In local economic reports, the Brazilian Census Bureau reported that retail sales declined a seasonally adjusted 0.38% in August compared to July. Still, retail sales advanced 6.47% in August compared to a year ago.

Separately, the private Getúlio Vargas Foundation reported that the General Price Index, or IGP-M, advanced 0.25% during the first 10 days of October, compared with a decline of 0.56% during the first 10 days of September. The most recent result was in line with market expectations.

In corporate news, Brazilian iron ore miner CVRD advanced, after a major investment bank lifted the firm’s price target, as the brokerage believes the firm will be the main beneficiary of continued strength of high commodity prices.

Elsewhere, airplane maker Embraer announced that its aircraft delivery rate increased during the third quarter to 41 aircraft from 30 in the second quarter.

Elsewhere, a mining trade group reported that iron ore export volume jumped 8.6% in September, compared to the corresponding period a year ago. For the first nine months of the year, exports advanced a little over 10% compared to the same period in 2004.

Mexican issues likely felt some pressure from a disappointing U.S. consumer sentiment reading and industrial production report. Most of Mexico’s exports are absorbed by its northern neighbor. In local economic news, the central bank left monetary policy unchanged and kept the daily money market liquidity restriction, or corto, at approximately US$ 7 million.

On the corporate front, ICA said that it intends to issue a one-for-six reverse stock split on November 14. Under the split, the engineering and construction firm will cancel 2.42 billion outstanding shares and replace them with one new share for every six held.

Meanwhile, Reforma newspaper reported that Mexican state oil firm Pemex may soon form a strategic alliance with Brazil’s Petrobras. The deal would have both firms sharing information and technology correlated to deep water exploration.

Within the food industry, Grupo Bimbo extended the early debt buyback deadline for bondholders of its Argentine unit, Compania de Alimentos Fargo to October 27 from October 6.

Argentina, meanwhile, ended a three-day losing streak, and outshined its larger regional markets. In economic news, Argentina’s current account surplus was US$ 1.785 billion in the second quarter, up from US$ 1.772 billion in the corresponding period a year ago.

Thomson Financial Corporate Group – www.thomsonfinancial.com

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