Standard and Poors Rates Brazil a Notch Higher

Latin American markets were mixed to lower, this Tuesday, with Mexican stocks following Wall Street lower, while Argentine issues were weighed down by disappointment over the third-quarter earnings season. Brazilian shares managed slight gains on an upgrade of the country’s sovereign debt outlook.

Brazil’s Bovespa Index added 18.36 points, or 0.06%. Mexico’s benchmark Bolsa Index dipped 13.44 points, or 0.08%, while Argentina’s Merval Index fell 31.33 points, or 1.90%.

Brazilian shares ended modestly higher, reversing earlier losses, as investors were cheered by news that Standard and Poor’s upgraded its outlook for Brazil’s long-term local and foreign currency sovereign credit ratings to "positive" from "stable."

S&P left the actual ratings unchanged at ‘BB-‘ for long-term foreign, ‘BB’ for long-term local and ‘B’ for short-term foreign and local currency sovereign credit.

On the earnings front, steel maker Gerdau said its third-quarter net profit fell 31.5% to US$367 million from a year ago. Net revenue fell 2.7% from last year, as a strengthening of the Brazilian real against the U.S. dollar hurt exports.

Meanwhile, steelmaker Usinas Siderurgicas de Minas Gerais reported a third-quarter net profit of 782 million reais, down 22% from a year earlier. Net revenue fell 5% to 3.126 billion reais from 3.285 billion reais last year. Also, EBITDA sank 22% to 1.265 billion reais.

In other corporate news, an influential investment bank raised its price target for Banco Bradesco to US$ 58 from US$ 48, citing the company’s upbeat third-quarter earnings results.

In economic news, the National Confederation of Industries reported that Brazil’s utilization of installed industrial capacity declined to 80.1% in September from 83.6% in the same a year earlier. Use of capacity also fell from August’s rate of 82.0%.

Elsewhere, Mexican stocks eased lower, in line with Wall Street, amid a dearth of local market news. U.S. shares were dragged under by concerns about a possible slowdown in the U.S. housing sector and consumer spending after U.S. homebuilder Toll Brothers issued a disappointing outlook.

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.

Argentine issues dropped, as investors fretted over recent disappointing earnings reports from local companies.

Monday, November 7, Petrobrás Energia Participaciones reported lackluster earnings. Results were hurt in part by higher sales and administrative costs, and taxes on earnings.

The oil giant posted a net profit of 118 million pesos for the third quarter of 2005, down from 151 million pesos a year earlier. Net sales for the period rose to 2.73 billion pesos from 2.36 billion pesos a year ago, while gross profit increased to 869 million pesos from 819 million pesos.

Weighing on financial shares, Banco Frances dropped amid disappointment among some investors that the company did not post a bigger net profit. The bank reported a net profit 25.8 million pesos, reversing a year-ago loss of 8.1 million pesos.

Thomson Financial Corporate Group – www.thomsonfinancial.com

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