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Hopes of Lower Interest Help Brazilian Stocks

Latin American stocks advanced, with Brazilian shares gaining on hopes that weaker-than-expected economic growth data will prompt the central bank to cut interest rates more aggressively.

Meanwhile, Argentine shares rebounded from a two-day sell-off on news the country’s Economy Minister was replaced.

Brazil’s Bovespa Index jumped 265.21 points, or 0.84%. Mexico’s benchmark Bolsa Index gained 136.01 points, or 0.81%, while Argentina’s Merval Index rose 21.20 points, or 1.38%.

Brazilian stocks climbed after weaker-than-expected economic growth data boosted expectations the central bank will be more aggressive in cutting interest rates at upcoming monetary policy meetings.

The Brazilian census bureau, or IBGE, said gross domestic product rose 1% in the third quarter from a year ago. The most recent result showed a slowdown in growth from the second-quarter’s revised 4% rise and came in beneath analyst estimates. Also, the economy contracted 1.2% in the third quarter from the second quarter.

In response to the sluggish growth data, economists in Brazil reduced their full-year economic growth forecasts, saying the economy remains weak in the fourth quarter due to the continued impact of lofty interest rates. Growth estimates were reduced to between 2% and 3% from previous forecasts of about 3%.

On the political front, Brazil’s supreme court ruled in favor of allowing the country’s lower house to hold a vote tonight on the removal of Workers’ Party legislator and former Presidential Chief-of-Staff, Jose Dirceu, from his seat in congress.

In corporate news, state-run oil firm Petrobras denied press reports that it was planning construction of a refinery in Africa that could cost more than US$ 2 billion.

Elsewhere, Mexican shares gained ground, as investors digested a mixed batch of U.S. economic news. The Federal Reserve said in its latest Beige Book of current economic conditions that the U.S. economy continues to expand, but at remarkably different rates across the country.

Meanwhile, the Chicago PMI slowed in November from the prior month, while the third-quarter GDP reading was upwardly revised to show 4.3% growth. Mexico ‘s economic health is tied closely to that of the U.S. since Mexico sends nearly 90% of its exports north of the border.

Closer to home, the National Statistics Institute, or Inegi, said today that Mexico’s mining production surged in September, with silver, gold and copper production all posting robust gains.

Among individual shares, Cintra dropped following news that the airline holding company sold only one of its two main airlines in a privatization tender.

Carrier Mexicana was sold to hotel operator Grupo Posadas for US$ 165.5 million plus debt and other financial obligations, setting the value of the carrier at US$ 1.46 billion. However, AeroMexico was not sold as the bid for the carrier was too low. Cintra said it still hopes to sell Aeromexico at a later date.

Argentine issues jumped, as investors went in search of bargains following a recent sell-off on news earlier this week that that Economy Minister Roberto Lavagna has been replaced by Felisa Miceli, currently president of state-owned Banco de La Nacion. A number of investors are concerned over whether she has enough experience to contain inflation.

In economic news, the national statistics agency INDEC said today that Argentina’s trade surplus came in at US$ 916 million in October, wider than the year-ago surplus of US$ 854 million. The result was helped by strong export figures.

Thomson Financial Corporate Group – www.thomsonfinancial.com

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