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Brazilian Investors Go Shopping After Recent Stock Market Sell-Off

Latin American stocks were mixed, with Brazilian shares jumping on bargain hunting and tame inflation data. Meanwhile, Mexican issues dipped in light trading ahead of the Easter holiday.

Markets in Mexico and Argentina will be closed tomorrow and Friday, while Brazil’s market will only be closed on Friday.

Brazil’s Bovespa Index surged 526.22 points, or 1.39%. Mexico’s benchmark Bolsa Index fell 142.53 points, or 0.73%, while Argentina’s Merval Index rose 11.76 points, or 0.64%.

Brazilian stocks posted solid gains, as investors went in search of bargains following a sell-off in recent days amid worries about the impact of rising oil prices on the inflation and interest-rate outlooks at home and abroad.

Investors may have also been positioning themselves for the expiry of options contracts on Monday, according to news services.

Shares were further boosted by a pair of economic reports showing tame inflation. Brazil’s General Price Index (IGP-M) fell 0.43% in the first 10 days of April compared with a 0.09% decline in the first 10 days of March, the Getúlio Vargas Foundation reported.

Also, the Fipe research foundation said the pace of consumer price inflation in São Paulo slowed in the four weeks ended April 7 to 0.03% from 0.14% seen in March. The tame inflation data added to expectations that Brazil’s central bank will cut the Selic base interest rate when it meets next Wednesday.

In corporate news, a major investment bank started coverage of wireless carrier Tim Participações with a "buy" rating, citing the company’s competitive positioning and strong management and growth outlook.

Brazil’s Justice Ministry antitrust body Cade approved the sale of a 95% stake in VarigLog, the logistics arm of airline Varig. VarigLog was bought by Volo do Brasil for US$ 46 million in January.

Aircraft maker Embraer said it delivered 27 aircraft in the first quarter of 2006, down from the 30 aircraft delivered a year earlier and the 40 aircraft in the fourth quarter.

Mexican shares bucked the broader positive trends seen elsewhere in Latin America and the U.S. Local shares dropped in light holiday trading, as the market is closed tomorrow and Friday in observance of the Easter holiday. U.S. shares benefited from a larger-than-expected drop in the U.S. trade gap in February, while select stocks also aided the markets.

The Finance Ministry said that production jumped 5.4% in February from a year ago; although, that figure was slightly below analyst expectations. On a non-annualized, seasonally-adjusted basis, production rose 0.16% from January.

In corporate news, a major investment house raised its price target on beverage firm Femsa due to market share and margin recovery in beer. Growth in retail was also cited for the positive note.

Elsewhere, conglomerate Grupo Empresariales Los Angeles announced that it will pay up to 289.9 million pesos for a controlling stake in financial firm Multivalores Grupo Financiero, which runs a brokerage house and independent mutual fund firm.

Argentina received a healthy boost just before the close of the day; although, trading was light ahead of the four-day weekend. Tenaris, a market heavyweight, accounted for much of the Merval index’s gains today.

Thomson Financial – www.thomsonfinancial.com

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