Heating US Economy Gives Brazilian Market the Chills

Latin American stocks retreated, as stronger-than-expected U.S. jobs data stoked concerns about a continued rise in U.S. interest rates. Brazilian and Mexican shares were further pressured by profit taking following recent gains.

Brazil’s Bovespa Index dropped 358.55 points, or 0.91%. Mexico’s benchmark Bolsa Index tumbled 397.35 points, or 2.00%, while Argentina’s Merval Index fell 13.00 points, or 0.71%.

Brazilian stocks dropped on heightened concerns about rising U.S. interest rates following the release of stronger-than-expected U.S. employment data that sent U.S. Treasury yields higher.

U.S. non-farm payrolls jumped by 211,000 in March, exceeding expectations for a rise of 200,000. Also, the unemployment rate fell unexpectedly to 4.7%, the lowest level since July 2001.

The data suggested the economy may be gaining steam, fueling concerns the Federal Reserve will continue to raise interest rates to contain inflation. Higher U.S. rates tend to divert investment flows away from emerging markets like Brazil.

Closer to home, Brazil’s official IPCA consumer inflation rate accelerated to 0.43% in March from 0.41% in February amid higher fuel prices, the IBGE Census Bureau reported. Still, the rate came in below forecasts of 0.46%. The monthly rate was slightly lower

In corporate news, paper and pulp producer Aracruz reported a first- quarter net profit of 347.9 million reais, up 73% from 200.8 million reais in the first quarter of 2005.

Meanwhile, a major investment bank initiated coverage of Brazil’s largest telecom carrier Telemar with an "equalweight" rating. "This year’s transition to lower tariff hikes, combined with near-zero line growth and declining local traffic, produces a flattish top line in real terms," the bank said.

Mexican shares fell sharply, alongside U.S. market declines and amid profit-taking, as the key IPC Index reached consecutive record highs earlier this week. U.S. inflation concerns were reignited by a strong March employment report.

In economic headlines, the Bank of Mexico said that the consumer price index advanced 0.13% in March, lowering annual inflation to 3.41% from 3.75% in February.

The most recent result was mostly in line with analyst expectations. Core inflation, which excludes some fresh produce, energy and education, leapt 0.44% in March, lifting the annual rate to 3.04% from a record low of 2.90% in February.

Turning to corporate reports, a major investment bank lowered its rating on bottler Coke Femsa to "neutral" from "buy," on a valuation call.

Elsewhere, Standard & Poor’s lifted Cemex’s credit rating into investment- grade territory due to the "successful integration" of the RMC Group of the U.K.

Argentina followed the broader indices into the red today. Similar to Mexican shares, some profit taking is at work, after the Merval Index reached a record level this past Wednesday.

Spanish-Argentine firm Repsol-YPF declared a force-majeure on natural gas deliveries to power firms in Chile due to reduced output from pipeline damage in Bolivia. Repsol said that domestic demand first needed to be met. Separately, the firm signed a deal with the Nigerian government to build a liquefied natural gas plant in Nigeria.

Thomson Financial – www.thomsonfinancial.com

Tags:

  • Show Comments (0)

Your email address will not be published. Required fields are marked *

comment *

  • name *

  • email *

  • website *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Ads

You May Also Like

GDP, Inflation and Interest Rates Expected to Go Up in Brazil Next Year

According to a Brazil's Central Bank poll among financial experts, which is published weekly ...

How Cuba Fits into Brazil’s Plans

An agreement with Cuba is consistent with the Mercosur’s strategy of building a Community ...

Cattle Genes Bring Brazil US$ 80 Million in 2008

Since 2004, Brazil has been the world's largest exporter of cattle beef and, more ...

Brazilian Bug Helps New Zealand Fight Killer Weed

A quiet bush clad reserve in the heart of the Manawatu, a New Zealand ...

What Brazil Needs Most Is Wealth Transfer

Among the experiences presented in BrasÀ­lia at the 32nd Session of the United Nations ...

Stones Roll Their Biggest Show Ever in Rio, Brazil

Just a week before Carnaval, the Rolling Stones drew an estimated one and a ...

Wired Town

If successful, Porto Digital might well serve as a model for revitalizing the rest ...

Petrobras's probe ship off the coast of Brazil

Light Oil Discovery in Brazil Opens Windows of Opportunity

Tests carried out by Petrobras through vertical well 1-RJS-628A drilled at 2,140 meters (7,021 ...

In a Decade Brazil’s Petrobras Jumps from 27th to 3rd Place in the World

Based on market capitalization, the prestigious PFC Energy 50 list of the world’s biggest ...

Traveling with a Purpose

Travelers will soon be able to work the ground at a farming settlement in ...