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Interest-Rate Cut to 18.5% Boosts Brazil Market

Latin American stocks were mixed, with Brazilian stocks posting robust gains on expectations of further monetary easing. Meanwhile, Mexican shares were dragged down by profit taking.

Brazil’s Bovespa Index surged 453.55 points, or 1.44%. Mexico’s benchmark Bolsa Index dropped 152.93 points, or 0.91%, while Argentina’s Merval Index edged up 1.65 points, or 0.10%.

Brazilian stocks powered higher amid expectations the country’s central bank would announce another interest-rate cut after the market’s close. As expected, the bank cut interest rates by 50 basis points to 18.5%, the third rate reduction in as many months.

Shares were also supported by continued positive sentiment generated by Finance Mister Antonio Palocci’s testimony before congress yesterday.

He defended his austere fiscal policies, which have been credited with reviving Brazil’s economy. The testimony helped to ease concerns over recent rumors that Palocci might resign.

In economic news, Brazil’s tax receipts rose 4.4% in October from a year ago, helped by economic growth and an increase in corporate income-tax collection.

Elsewhere, Mexican shares fell, as investors took some profits following five straight sessions of record closing highs. Weighing on sentiment somewhat, the Finance Ministry reported late in today’s session that Mexico’s trade deficit widened to US$ 631 million from US$ 313 million in September and a year-earlier deficit of US$ 611 million.

Among individual shares, America Movil was active after the company announced late yesterday that it plans to pay an extraordinary dividend of 0.30 pesos a share.

Meanwhile, shares of airline holding company Cintra extended yesterday’s losses that followed news the government received only two bids each for majority stakes in the company’s main airlines AeroMexico and Mexicana.

Argentine issues were little changed, as investors awaited news on Argentina’s move to begin talks with the International Monetary Fund about a new accord. Finance Minister Lavagna indicated earlier this week that IMF talks should start within 20 days.

In economic developments, Argentina logged a primary surplus of 700 million pesos in October, well below market forecasts of 1.685 billion pesos and September’s surplus of 1.617 billion pesos.

Thomson Financial Corporate Group – www.thomsonfinancial.com

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