Brazil Market Goes Up While Expecting Interest Rate Cut

Latin America moved higher across the board, giving some relief to investors following recent bouts of negative activity. Investors in both the U.S. and Brazil mostly ignored strength in crude oil prices, as tropical storm Wilma could make its way to the Gulf.

U.S. shares were bolstered by Dow member General Motors, which reached an agreement with the United Auto Workers union to cut health costs. Also, a U.S. Supreme Court decision that rejected a key appeal in favor of the tobacco industry bolstered Altria Group.

Brazil’s Bovespa Index surged 471.39 points, or 1.58%. Mexico’s benchmark Bolsa Index rallied 389.85 points, or 2.62%, while Argentina’s Merval Index advanced 9.97 points, or 0.62%.

Brazilian receipts were upbeat ahead of the central bank’s monetary policy meeting this week, in which investors expect up to a half a point cut in rates. Meanwhile, in a weekly central bank survey, analysts lifted their forecast for the country’s 2005 trade surplus to US$ 41.72 billion from US$ 41.54 billion the prior week.

On the corporate front, state-run energy firm Petrobras signed contracts with USC to supply the firm 1.8 million cubic meters of natural gas a day for 20 years. USC is a joint-venture steel mill what is set to be built in northeastern Brazil. In mining, CVRD’s foreign currency bonds were upgraded by Moody’s Investors Service to positive from stable.

Turning to earnings releases, paper and pulp firm VCP said that its third-quarter net profit declined 44% to 114 million reais from 205 million reais a year earlier, partly due to the appreciation of the real against the greenback. EBITDA declined 21% to 244 million reais from 309 million reais last year, while revenues edged down to 692 million reais from 711 million reais.

No-frills airline Gol announced that it received its 39th Boeing 737 aircraft. The firm also preserved its 2005 target for a total fleet of 42 jets. Elsewhere in the industry, according to financial newspaper Valor Econômico, TAM intends on a new share offering and a listing on the New York Stock Exchange in 2006.

In Mexico, stocks rallied, as investors bought up recently beaten down shares. Regional strength, as well as a positive session for Mexico’s key trading partner, the U.S., also aided investor sentiment.

Broadcaster Grupo Televisa gained ground on word the firm is part of a consortium bidding for a license to operate a television station in Spain. Televisa is set to own 40% of the consortium.

Southern Peru Copper changed its name to Southern Copper Corp. in order to reflect the firm’s "international nature," according to a company spokesperson. Grupo Mexico is the firm’s parent company.

Argentina followed regional shares into the black, despite some local turmoil. Also, options contracts expire on Thursday, and congressional elections are set for Sunday.

Meanwhile, approximately 28,000 oil and natural gas workers went on strike to demand higher wages. Repsol YPF and Petrobras are among the firms in negotiations with the workers.

Thomson Financial Corporate Group – www.thomsonfinancial.com

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