Red Light for Interests in US Gives Green Light to Brazilian Bulls

Latin American stocks were mixed to higher, with Brazilian shares gaining, as sluggish U.S. jobs data boosted hopes that the U.S. Federal Reserve will pause its monetary tightening cycle.

Brazil’s Bovespa Index jumped 441.49 points, or 1.08%. Mexico’s benchmark Bolsa Index dipped 56.21 points, or 0.26%, while Argentina’s Merval Index surged 46.28 points, or 2.50%.

Brazilian shares advanced, as weaker-than-expected U.S. jobs data helped to ease worries about a continued rise in U.S. interest rates. U.S. nonfarm payrolls rose by 138,000 in April, less than the 199,000 expected by economists.

The data boosted hopes that the U.S. Federal Reserve will take a more dovish stance on monetary policy. Higher U.S. interest rates tend to divert investment flows away from emerging markets like Brazil.

In local economic news, Brazilian industrial output fell 0.3% in March from February but jumped 5.2% from a year earlier. The IBGE said the month-on-month decline was due to seasonal factors including a retooling of industrial facilities.

On the corporate front, Brazilian airline TAM SA reported a first-quarter net profit of 111.2 million reais, up sharply from 53.5 million reais a year earlier, on an expansion of routes and rising overall demand. Net revenue was up 24% to 1.59 billion reais.

Meanwhile, a major investment bank downgraded Vivo Participações to "underweight" from "neutral." "We see first-quarter results as a significant downward inflection point, as Vivo service revenues declined for the first time in nominal terms.

"Going forward, we do not expect this negative trend to reverse significantly, given Vivo’s apparent inability to thrive in a very competitive environment," the bank said.

Elsewhere, Mexican shares ended lower after erasing earlier gains on an improved outlook for U.S. interest rates. In corporate news, airport operator Asur said April traffic at its airports was down 2.3% from April 2005, due partly to the slow recovery of tourist travel to Cancun and Cozumel following Hurricane Wilma.

Argentine issues followed regional equities higher, in a quiet news day for the local market. Argentine natural gas pipeline operator Transportadora de Gas del Sur SA posted a quarterly net profit of 90.4 million Argentine pesos, down from 93.2 million pesos a year ago.

Thomson Financial – www.thomsonfinancial.com

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