Low Inflation in the US Gives Brazilian Stocks a Boost

Latin American stocks were mixed to higher, with Brazilian and Mexican shares climbing on reassuring U.S. inflation data. On the down side, Argentine issues extended recent losses.

Brazil’s Bovespa Index added 144.99 points, or 0.37%. Mexico’s benchmark Bolsa Index rose 128.93 points, or 0.62%, while Argentina’s Merval Index lost 7.75 points, or 0.44%.

Brazilian stocks edged up, as tame U.S. producer price data helped to ease worries about rising U.S. inflation and interest rates. The core producer price index rose just 0.1% in April, suggesting that surging energy costs have yet to feed into generalized inflation.

In local corporate news, mining giant Vale do Rio Doce announced a 19% price hike for iron ore sold to German steel maker ThyssenKrupp. Analysts had expected a slightly higher price increase, leading some to reassess their 2006 and 2007 earnings forecasts for the company.

São Paulo state waterworks utility Companhia de Saneamento Básico do Estado de São Paulo SA (Sabesp) reported a first-quarter net profit of 327.9 million reais, up sharply from 151.4 million reais a year earlier, as results were helped by an increase in tariffs.

Also reporting, electric power utility Companhia Paranaense de Energia SA (Copel) said its first-quarter net profit surged to 171 million reais from the 78 million reais a year ago on a 14% rise in revenue.

Elsewhere, Mexican shares gained ground, snapping a four-session losing streak, as investors were cheered by today’s benign U.S. inflation data and recent signs of strength in the Mexican economy. Data released yesterday showed a 9.7% rise in Mexico’s industrial production in March.

Argentine issues fell, extending recent losses, in a quiet news day for the market. Among the headlines, flagship carrier Aerolineas Argentinas and its pilots and mechanics unions agreed to a 19% pay hike, ending a long-running labor dispute. As part of the deal, workers will not resume wage negotiations until January of next year and will maintain a truce until March 2007.

Thomson Financial – www.thomsonfinancial.com

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