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Argentina and Wall Street Drag Stocks Down in Brazil

Brazilian and Latin American stocks ended in negative territory, amid profit-taking, expectation about new Brazilian GDP figures, a surprise personnel change in the Argentine government and weakness on Wall Street.

Brazil’s Bovespa Index fell 562.11 points, or 1.76%. Mexico’s benchmark Bolsa Index lost 43.26 points, or 0.26%, while Argentina’s Merval Index sank 73.11 points, or 4.49%.

Brazilian stocks turned lower, despite a higher start, dragged down by soft performances elsewhere in the region and in the U.S., and following strong gains last week due to easing political tensions and a fresh interest rate cut. Traders were also cautious ahead of GDP figures to be released later this week.

In today’s data, the October primary budget surplus totaled 8.55 billion reais, up from 7.57 billion reais in September, the highest such surplus ever registered for October. However, the market had bet on a surplus of about 9 billion reais.

Separately, a weekly central bank survey found that analysts expect year-end inflation of 5.59%, up from 5.53% in last week’s survey. Analysts also reduced their 2005 GDP forecast to 3% from an initial 3.09%.

In corporate news, airline Gol announced it will give passengers up to three years to pay for their tickets, a move aimed at attracting lower income customers.

Also of note, Internet provider Universo Online unveiled details of its IPO, with shares expected to start trading on December 16. The firm will offer 25.7 million shares, with 15.42 million via an IPO and 10.28 million via a secondary offering.

Argentine shares tanked on news that President Kirchner will replace Economy Minister Lavagna with Felisa Miceli, currently president of state-owned Banco de La Nación.

The dismissal reportedly stems from alleged tensions between Lavagna and Kirchner over policy matters, alleged cartels in the construction industry and a variety of criticisms from various sectors of business over a rise in inflation.

Uncertainty over future policies and projects from Miceli and the perception that she is less experienced than Lavagna pushed the local bond and equity markets deep into the red.

Also of note on the economic front, October building activity rose 23.2% in October from a year ago, or 3.9% from the prior month.

In company news, Telecom Personal, a unit of Telecom Argentina, and Canada-based Research In Motion reported the launching of Research In Motion’s popular wireless BlackBerry device in Argentina.

Elsewhere, Mexican shares ended in the red as well, as traders booked profits after several record-breaking sessions last week, and as U.S. counterparts suffered from mild profit-taking. Of note, in U.S. data, existing home sales dropped to 7.09 million from 7.29 million in September, tumbling past the consensus estimate to fall to 7.20 million.

In the energy patch, state-owned oil company Pemex reported it could trim its workforce, as it could do without 30,000 unionized employees out of a total of 115,000, according to news services.

Thomson Financial Corporate Group – www.thomsonfinancial.com

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