Latin American stocks were mostly higher, with Brazilian stocks posting robust gains, as investors cheered a sharp drop in oil prices.
Meanwhile, Mexican shares leapt higher amid expectations the Bank of Mexico will cut interest rates further this Friday.
Brazil’s Bovespa Index climbed 767.92 points, or 2.10%. Mexico’s benchmark Bolsa Index gained 428.30 points, or 2.32%, while Argentina’s Merval Index shed 1.06 points, or 0.06%.
Brazilian stocks jumped, as a steep drop in oil prices helped to ease worries about inflation at home and abroad. Investors have grown concerned recently that high energy costs will fuel local inflation and impede the Brazilian Central Bank’s cycle of lowering interest rates from their lofty levels.
Another fear is that high global oil prices will prompt the U.S. Federal Reserve to continue its interest-rate hiking cycle longer than expected. High interest rates in developed countries like the U.S. tend to draw funds away from emerging markets like Brazil.
In corporate news, mining giant Companhia Vale do Rio Doce said it was making an offer for the outstanding preferred shares of smaller rival Caemi Mineração and Metalurgia that it does not already own.
Shares of Companhia Siderúrgica Nacional climbed after the company said that an accident over the weekend did not damage the infrastructure of one of its blast furnaces. However, the company did not say when the furnace would be restarted.
In addition, a major investment bank said the financial impact of the accident is "likely to be material but not large." Also, a credit-ratings agency said the accident would not have any immediate effect on the company’s credit ratings.
Meanwhile, shares of Petrobras were active after an influential brokerage raised its price target for the company’s ADRs to US$ 110 per share.
Telecom giant Telemar said that it plans to invest US$ 442 million to put systems in place to distribute audiovisual content via its broadband Internet network this year.
In other news, a Brazilian congressman said Brazil’s government will approve a 17% increase in the minimum salary to a new monthly level of 350 reais.
Elsewhere, Mexican shares posted robust gains amid a mixed batch of economic data. The Finance Ministry reported that Mexico posted a trade deficit of US$ 1.2 billion in December, narrower than the US$ 2.26 billion deficit a year earlier and the $ 1.51 billion shortfall in November. The December deficit also beat forecasts for a shortfall of US$1.69 billion. Exports rose 24.8% in December to US$ 19.41 billion, and imports grew 15.7% from a year ago to US$ 20.6 billion.
Meanwhile, the Bank of Mexico said the consumer price index gained 0.32% in the first half of January, above expectations for an increase of 0.29%. The inflation reading also exceeded the year-earlier level of 0.08%. Still, a number of market watchers do not expect the data to diminish the likelihood of further interest-rate reductions by the central bank, which is widely expected to cut rates by 50 basis points at its next meeting on Friday.
On the corporate front, Alfa SA reported fourth-quarter earnings of 673 million pesos, down from 1.97 billion pesos a year earlier, as results were hurt in part by the sale of steel unit Hylsamex in the third quarter.
Argentine issues were little changed in a light news day for the market. Late yesterday, the government extended its policy of containing inflation via industry-level price accords. The government secured price agreements with beef producers and food company Molinos Rio de la Plata late. A number of investors have been skeptical about the effectiveness of this strategy.
Thomson Financial – www.thomsonfinancial.com