Foreign Investors Bring Brazilian Shares to Record High

Latin American stocks put in a very positive performance today, as Brazil, Mexico and Argentina all rallied. Foreign investors continue to buy into the region.

U.S. markets were also very upbeat, thanks to strong quarterly results from Caterpillar, AT&T, Verizon Communications and Honeywell International. Strong U.S. durable goods orders added to investor enthusiasm.

Brazil’s Bovespa Index surged 614.69 points, or 1.64%. Mexico’s benchmark Bolsa Index leapt 350.38 points, or 1.86%, while Argentina’s Merval Index jumped 16.05 points, or 0.94%.

Brazilian shares rallied today, closing at a record high, as foreign investors continued to buy up shares in the region. The main stock exchange was closed yesterday to celebrate São Paulo’s 452th birthday.

Investors found some comfort in Finance Minister Antonio Palocci’s denial of corruption allegations during a senate inquiry. Palocci also said he would not leave office this year.

In economic-related reports, the Brazilian Central Bank minutes were released from its last meeting regarding interest rates. The minutes indicated that the bank will continue its policy of gradually reducing interest rates. Also, the official jobless rate declined to 8.3% in December from 9.6% in November.

Turning to corporate headlines, CVRD rallied, after the mining firm’s board announced a capital expenditure budget of US$ 4.6 billion for 2006. The board also set a minimum shareholder dividend of US$ 1.3 billion for this year.

Within the airline group, no-frills airline Gol said that it reached breakeven on its new routes in South America. The firm’s president said Gol would like to increase its share of the international air market to 8.2% in 2007 from its current level of 5.8%. Gol rallied on the news.

Petrobras was also in the spotlight. The state-run oil firm said that it does not plan to cut its gas reserves as of yet due to policy changes in Bolivia. Meanwhile, a major investment bank raised its price target on the firm, partly due to its "solid operating story."

Following Brazil’s lead, Mexican shares also reached another record high today, ahead of what is expected to be a very positive earnings season for the country. Cemex is set to report results tomorrow.

Mexico’s fifth-largest bank Banorte said that it would announce a "transaction of significant importance" some time today. The firm will also report its fourth-quarter and full-year results.

Argentina took part in today’s broader regional rally, following declines in recent weeks. Spanish-Argentine firm Repsol YPF announced that it expects a 25% downward revision to its hydrocarbon reserves.

The firm downgraded its proved reserves by 1.254 billion barrels of oil equivalent, mostly related to natural gas reserves. Despite the news, the firm said that it expects its 2005 earnings to be consistent with results from the first three quarters.

Thomson Financial – www.thomsonfinancial.com

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