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News that Bank of Brazil Took Part in Government Scandal Helps Chill Brazil Market

LatAm Stocks End Mixed
CSN, Aracruz, Gol
Beatrice Denis

News that Bank of Brazil Took Part in Government Scandal Helps Chill Market
Market

Latin American markets ended mixed to lower, following a lackluster day on Wall Street, inflation concerns in Brazil, profit-taking and mixed earnings reports.
Brazil’s Bovespa Index lost 212.47 points, or 0.68%. Mexico’s benchmark Bolsa Index rose 102.49 points, or 0.65%, while Argentina’s Merval Index shed 11.52 points, or 0.68%.

Brazilian equities declined. A rally of the U.S. dollar following weak U.S. employment data was reportedly behind the decline. U.S. non-farm payrolls grew by 56,000 in October, well below the 124,000 increase anticipated on the Street.

The jobless rate eased to 5.0% from 5.1%, in line with targets. The report suggested the U.S. Fed is likely to continue raising interest rates, a trend generally seen as a negative for emerging markets.

Profit-taking and fresh developments in the ongoing political scandal were also blamed for the Bovespa’s underperformance. News services reported new allegations that the ruling Workers’ Party took funds from government-owned Banco do Brasil to pay for political campaigns and pay off congress members in exchange for votes.

In domestic economic data, the consumer price index for São Paulo rose by 0.63% in October from 0.44% the prior month, above expectations of about 0.50%. The report spurred some fear of inflation and deceleration of the central bank’s rate-cutting campaign. Also, motor vehicle output fell 7.9% in October from the prior month.

In corporate news, steelmaker CSN reported a third-quarter net profit of 517 million reais, a 26% decline from the prior year. The firm blamed lower domestic sales, lower export prices and a stronger real.

On the bright side, paper and pulp company Aracruz Celulose benefited from Standard & Poor’s decision to raise its investment rating to investment grade.

In the transportation sector, airline Gol stated that system-wide traffic rose 70% in October, with capacity increasing 64%.

Meanwhile, Mexican shares rose, rebounding from recent losses induced by profit-taking, and despite a mixed performance from U.S. counterparts and little domestic news.

Of note, though, a major investment bank raised its rating on conglomerate Alfa SA to "outperform" from "peer perform," saying the firm’s portfolio "remains solid and the growth outlook, with a strong backlog of projects, is attractive."

Elsewhere, Argentine stocks eased back, after yesterday’s rally. Corporate news remained scarce, but all eyes were on the Summit of the Americas, held locally and where discussions on a free trade agreement continued.

Of note, in earnings, Spanish-Argentine oil firm Repsol reported a 21.8% increase in net profits to 934 million euros for the third quarter.

Thomson Financial Corporate Group – www.thomsonfinancial.com

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