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Primary Surplus and Inflation News Takes Brazilian Stocks to Record High

Brazilian shares surged on further signs of strength in Latin America’s biggest economy, while continued earnings optimism also boosted Mexican issues. Profit taking dragged Argentine stocks lower.

Brazil’s Bovespa Index leapt 671.99 points, or 1.69%, while Mexico’s benchmark Bolsa Index rose 206.30 points, or 1.01%, and Argentina’s Merval Index fell 19.16 points, or 0.99%.

Brazilian stocks advanced to a record closing high, as investors reacted to positive primary surplus and inflation data. The central bank reported that Brazil logged a primary surplus of 86.809 billion reais in the 12 months through March, equivalent to 4.39% of gross domestic product.

That was above a government target of 4.25% of GDP, helping to ease concerns that the government had boosted spending ahead of the October presidential elections.

Meanwhile, inflation as measured by the IPCA-15 index slowed to 0.17% in the March 15 to April 11 period, down from 0.37% in the February 11 to March 14 period, the IBGE reported.

Also, the Fipe research foundation said the São Paulo consumer price index fell 0.06% in the four weeks ended April 23, matching the decline seen in the four weeks ended April 15.

In corporate news, budget airline Gol Linhas Aereas Inteligentes said it received governmental authorization to operate 21 flights a week to the Chilean capital, Santiago. Yesterday, the company reported robust first- quarter earnings.

Oil giant Petrobras said that its stock will be listed on the Buenos Aires Stock Exchange starting Thursday. "We expect Petrobras to become the most traded share in Buenos Aires within six months," the company said. No new Petrobras shares will be issued in Argentina.

Electric energy utility Tractebel Energia SA reported a first quarter net profit of 343.8 million reais, up sharply from 172.2 million reais a year earlier.

Mexican stocks posted solid gains, hitting a sixth consecutive record high, amid continued optimism about the economy and first-quarter earnings. Among today’s quarterly reports, BBVA Bancomer said its first-quarter net profit jumped 84% to 4.90 billion pesos from 2.67 billion pesos a year earlier, helped strong growth in mortgage and consumer loans.

Meanwhile, airport operator Grupo Aeroportuario del Sureste SA (Asur) said its first-quarter net profit tumbled 42% from a year earlier due to lower passenger traffic at its biggest airport in Cancun. Revenue fell 17%.

Also reporting, home construction company Sare Holdings said its first- quarter net profit rose to 79.7 million pesos from 52.0 million pesos a year ago amid a jump in home sales.

On the economic front, the Bank of Mexico estimated that first-quarter gross domestic product rose 5.2%, and predicted that the economy will grow between 3.5% and 4% for the full year. That was up from the bank’s previous full-year growth forecast of 3.2% to 3.7%

Argentine issues dropped, as investors took profit in some of the Merval’s largest stocks, such as Tenaris and Petrobras Energia Participaciones, offsetting gains in banking and steel shares. Petrobras Energia was down ahead of its parent company’s listing tomorrow on the local stock exchange.

Giving steelmakers a boost, the national statistics agency said its construction index surged 16.5% in March from a year earlier. However, the index dipped a seasonally adjusted 1.1% in March from February.

Thomson Financial – www.thomsonfinancial.com

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