Brazilian Investors Rejoice with Lower than Anticipated Inflation

Latin American stocks advanced, with Brazilian stocks getting a boost from better-than-expected inflation data, while Mexican shares rose on optimism about the upcoming earnings season at home and in the U.S.

Brazil’s Bovespa Index added 250.94 points, or 0.65%. Mexico’s benchmark Bolsa Index gained 166.55 points, or 0.84%, while Argentina’s Merval Index jumped 29.43 points, or 1.62%.

Brazilian stocks climbed as tame inflation data added to expectations that the Brazilian central bank will continue, or perhaps accelerate, its interest-rate cutting campaign.

The Fipe research foundation said its São Paulo consumer price index rose 0.14% in March after dipping 0.03% in February. However, the March rise was below market expectations for inflation between 0.15% and 0.30%. The official IPCA inflation index for March is due for release on Friday.

In corporate news, petrochemical company Braskem said it had purchased local polyethylene company Politeno Indústria e Comércio SA, with an initial payment of US$ 111.3 million.

Brasil Telecom Participações was in focus after Telecom Italia said it is continuing talks with the controllers of the fixed-line carrier over the possible purchase of a further stake.

A major investment bank upgraded Embratel to "neutral" from "reduce," saying it sees some upside for the stock after a 26% slide this year.

Meanwhile, another investment bank reduced its price target for Telemig Celular to 6.30 reais from 7.75 reais. "TMB is implicitly for sale, and our target is driven by the price we think a strategic buyer will be willing to pay for the nonvoting TMB shares, above and beyond the necessary control price," the bank said.

Mexican stocks continued to power higher today, with the IPC Index once again hitting fresh record highs. Investors appear to be optimistic about earnings season both in Mexico and the U.S.

Conglomerate Alfa SA said that its auto parts unit Nemak intends to build a production facility in China, partly due to the "expected growth rate of the market and the increasing presence of our customers in the region."

Meanwhile, the government is set to sell its airline firm, AeroMexico, through a bidding process rather than through a stock offering. The target date to complete the sale is the end of the third quarter.

Argentine issues also took part in the broader regional upswing today, with shares hitting a fresh high. The benchmark Merval Index was strongly aided by heavyweight Tenaris, which rallied on the day alongside rising crude oil prices.

In economic news, the national statistics agency, or Indec, announced that the consumer price index rose 1.2% in March from February, slightly above analyst expectations. Nevertheless, the inflation rate for the 12 months since March 2005 was 11.1%, down from 11.5% in February.

Thomson Financial – www.thomsonfinancial.com

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