While Waiting US Fed’s Action Brazilians Warm Up the Market

Latin American stocks posted modest gains, with Brazilian shares getting a boost from tame inflation data and news of a potential stock split at minining firm Companhia Vale do Rio Doce (CVRD).

Meanwhile, upbeat GDP data and reassuring comments from the Bank of Mexico buoyed Mexican issues. Argentina’s market was closed.

Brazil’s Bovespa Index added 103.20 points, or 0.28%, while Mexico’s benchmark Bolsa Index rose 83.43 points, or 0.43%.

Brazilian stocks edged cautiously higher, as buyers nibbled on recently beaten down shares, amid continued concerns about rising U.S. interest rates ahead of next week’s Federal Reserve meeting.

Investors are anxiously awaiting the Fed’s statement that will accompany its anticipated rate hike on Tuesday for any indication of how much longer the current U.S. monetary tightening cycle will last.

In local economic news, Brazil’s inflation as measured by the IPCA-15 index decelerated to 0.37% in the February 11 to March 14 period, from 0.52% in the January 14 to February 10 period, IBGE said.

Also, Brazil’s Central Bank said it expects the country’s inflation rate to end 2006 and 2007 close to the goal of 4.5%. "It is expected that inflation will be very close to the goal of 4.5% for 2006 and 2007," the bank said.

In corporate news, investors reacted positively to reports that mining giant Companhia Vale do Rio Doce’s board of directors approved a 2-for-1 stock split proposal aimed at maintaining the liquidity of its shares. CVRD said the proposal still has to be approved at a meeting of shareholders.

Meanwhile, Standard & Poor’s Rating Services said it raised its foreign and local currency corporate credit ratings on media group Globo Comunicação e Participações S.A. (Globo) to ‘BB-‘ from ‘B+’. The outlook on the ratings is stable.

"The rating action was prompted by the significant improvement of Globo’s financial risk profile since the conclusion of its debt restructuring in mid-2005," S&P said.

In other corporate news, a major investment bank downgraded wireless provider Telemig Celular Participações SA to "underweight" from "equalweight," citing a deterioration in margins in the company’s fourth-quarter results.

Mexican shares recouped some of the previous day’s losses, which stemmed from profit-taking following a recent rally in the IPC index. In economic headlines, as expected, the Bank of Mexico eased monetary policy for the eighth time in so many months. The central bank reduced rates by 25 basis points to 7.25% and said it expects inflation to continue its recent downward trend.

Elsewhere, the National Statistics Institute, or Inegi, said that the economy grew 5.7% in January from a year ago, thanks to gains in industrial and agricultural production and services. The global indicator of economic activity, or IGAE, advanced 1.96% from December on a seasonally-adjusted basis.

In corporate news, local news reports said that a group of 45 senators will support a new radio and television law that should benefit Televisa. The bill has been criticized as being overly favorable for Televisa, Mexico’s leading broadcaster.

Thomson Financial Corporate Group – www.thomsonfinancial.com

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