Brazilian stocks plunged alongside a broader tumble amid emerging markets, as investors continue to ponder the future direction of U.S. interest rates.
Continued weakness in commodity prices pressured Brazil and Mexico alike, as both countries are major commodities exporters.
Brazil’s Bovespa Index tumbled 1,235.94 points, or 3.28%. Mexico’s benchmark Bolsa Index receded 812.85 points, or 4.03%, while Argentina’s Merval Index negated 64.78 points, or 3.91%.
Brazilian stocks plunged on the day, adding significantly to last Friday’s milder decline. Investors exited emerging markets, partly due to U.S. interest rate concerns and steep falls in commodity prices.
On the economic front, the Brazilian Ministry of Trade and Development said that Brazil posted a US$ 433 million trade surplus in the third week of May, bringing the year-to-date surplus to US$ 14.822 billion.
Turning to corporate reports, local business daily Valor Econômico said that airline TAM might buy planes from local manufacturer Embraer. A TAM official commented that the firm has not yet made a decision. The airline is in the market to replace its fleet of Fokker-100s.
State-run oil firm Petrobras will raise its oil output in 2007 by 560,000 barrels a day, according to Chief Executive Sergio Gabrielli.
Mining firm CVRD said late last Friday, May 19, that it reached an agreement on 2006 iron ore price contracts with Mittal Steel, in which that firm agreed to a 19% increase for iron ore fines.
Elsewhere, Standard & Poor’s Ratings Services raised its long-term corporate credit rating on CVRD, and removed the rating from CreditWatch.
S&P said the firm’s credit profile "is strengthened by improved operating and financial conditions in its home country Brazil, with positive implications particularly on its financial flexibility."
Mexican shares followed Brazil deep into the red, as an exodus by investors out of emerging markets pressured global markets. Investors had little else to focus on amid a dearth of local economic and corporate reports.
Argentina was also not able to escape the broader regional downturn, despite an upgrade for a market heavyweight. A major investment bank raised its rating for Tenaris to "buy" from "neutral" due to a recent decline in the steel pipe maker’s share price.
Also, the investment bank noted that Tenaris’ earnings and outlook should continue to receive support from a strong oil exploration up-cycle.
Thomson Financial – www.thomsonfinancial.com
