Brazilian Equities Resume Rally

Latin American stocks advanced, as investors resumed a recent buying spree, after sending shares lower Thursday. Shares have benefited so far this year from optimism about local economies and hopes the U.S. Federal Reserve is nearing the end of its interest-rate hiking cycle.

Today’s weaker-than-expected U.S. jobs report for December added to expectations for looser monetary policy.

Brazil’s Bovespa Index jumped 538.91 points, or 1.54%. Mexico’s benchmark Bolsa Index rose 128.44 points, or 0.69%, while Argentina’s Merval Index gained 16.38 points, 1.02%.

Brazilian stocks resumed a recent rally, with the Bovespa briefly moving above the 35,500 mark. Stocks are up sharply so far this year on expectations of solid Brazilian economic growth, tame inflation and further interest rate cuts in 2006.

The Brazilian central bank is seen reducing interest rates, currently at 18%, by at least 50 basis points at its next meeting on January 18. Hopes for looser monetary policy, in turn, have led economists to forecast 2006 economic growth of 3.5% to 4%.

Shares of mobile telecom carriers rose, amid indications that intense competition in the sector may be easing, news services reported, citing analysts.

Meanwhile, shares of Acesita were active, after European steel giant Arcelor took steps to assume majority control of the Brazilian specialty steel company. Arcelor reached a deal to buy a minority stake from a pension fund and announced a public offer for Acesita’s remaining common shares.

In other corporate news, the Brazilian Securities Commission said it will investigate what it called "unusual trading volume" on Thursday in shares of mining company Caemi Mineração and Metalurgia. Earlier today, Caemi announced that it completed the purchase of mining company Rio Verde for US$ 45 million.

Elsewhere, Mexican shares climbed, as weaker-than-expected U.S. jobs data added to expectations the U.S. Federal Reserve is close to ending its interest-rate hiking cycle. Non-farm payrolls climbed by 108,000 jobs in December, below expectations for an increase of 215,000 jobs. However, November payrolls were upwardly revised to show an increase of 305,000.

Closer to home, state oil company Petroleos Mexicanos, or Pemex, said gasoline sales in Mexico rose 5.6% last year. Sales averaged 672,000 barrels a day, compared with 613,000 b/d in 2004. In December, sales surged 4.6% from a year earlier.

In political developments, Mexican Social Development Secretary Josefina Vazquez resigned to join the campaign of the ruling party’s presidential candidate, Felipe Calderon.

A spokesman for President Vicente Fox said Vazquez’s resignation would be the last cabinet resignation of Fox’s term, which ends on December 1. A host of cabinet members have been replaced since Fox took office in 2000.

Argentine issues gained ground, as buyers returned to the market following a decline yesterday. Argentine issues are up strongly so far this year on strong foreign investor interest in emerging markets and bargain hunting following a poor performance for Argentine issues in December.

Argentine stocks were pressured last month by worries about mounting inflation and whether the government is taking appropriate steps to contain it. Concerns about the government’s decision to pay off its entire debt to the IMF ahead of schedule also weighed.

Thomson Financial – www.thomsonfinancial.com

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