World Oil Prices and US Interests Send Brazilian Stocks Down

Brazilian stocks an those of Latin American retreated, as investors continued cashing in recent market gains, as they assess the outlook for U.S. interest rates.

Brazil’s Bovespa Index dropped 904.43 points, or 2.17%. Mexico’s benchmark Bolsa Index fell 345.80 points, or 1.59%, while Argentina’s Merval Index sank 38.57 points, or 2.03%.

Brazilian stocks tumbled, as investors continued to fret over the outlook for U.S. interest rates, while digesting a flood of local earnings reports.

Fueling worries that U.S. interest rates will continue to rise, oil prices surged today and economic reports showed that U.S. business sales and inventories both climbed 0.7% in March. That followed comments from the U.S. Federal Reserve yesterday that left the door open for further rate hikes.

In earnings news, mining giant CVRD said late yesterday that its first-quarter net profit jumped 68% to US$ 1.17 billion from US$ 698 million a year earlier on higher iron ore prices and robust sales volumes.

Meanwhile, brewer AmBev posted a first-quarter net profit of 655.9 million reais, up sharply from 144.2 million reais a year ago, as warm summer temperatures boosted beverage consumption.

Also reporting, Banco Unibanco’s first-quarter net profit rose 29.7% to 520 million reais from 401 million reais a year earlier, helped by further growth in its credit portfolios and higher financial services revenue.

Petrochemical firm Suzano Petroquí­mica reported a first-quarter net loss of 28.4 million reais, reversing a year-earlier net profit of 27 million reais.

In other corporate news, Telemar said it will pay dividends of 3 billion reais for 2006 and a further 3 billion reais for 2007, once the telecom giant has completed a restructuring program.

In local economic data, Fiesp reported that manufacturers in São Paulo state added 40,000 jobs in April from March, representing a rise of 1.92% in the workforce.

Elsewhere, Mexican shares dropped on continued profit taking and uncertainty over the outlook for U.S. interest rates. In the news, a major investment bank said that it has lowered its exposure to Mexico while upgrading Peru and Argentina.

The bank downgraded Mexico to "underweight," citing volatility ahead of the country’s July presidential elections. "Absent the anticipated political noise in the upcoming months, we remain positive about Mexico’s prospects on the macro front for the remainder of the year," the bank said.

Argentine issues dropped in a quiet news day for the market. Among the headlines, power generator Endesa Costanera posted a first-quarter net loss of 12.3 million pesos, compared with a year-earlier profit of 34.9 million pesos.

Thomson Financial – www.thomsonfinancial.com

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