Brazilian stocks and those from Latin American in general retreated, as investors continued to fret over the outlook for U.S. inflation and interest rates.
Brazil’s Bovespa Index fell 318.04 points, or 0.88%. Mexico’s benchmark Bolsa Index plunged 279.26 points, or 1.46%, while Argentina’s Merval Index plunged 38.40 points, or 2.37%.
Brazilian stocks dipped, amid ongoing concerns that U.S. inflation and interest rates will continue to rise, potentially leading investors to rotate funds out of emerging markets like Brazil and into safe-havens such as U.S. Treasuries. Stronger-than-forecast new home sales data in the U.S. added to interest-rate jitters.
Helping to limit the market’s losses, however, Brazil’s central government posted a 14.9 billion reais primary budget surplus in April, up sharply from the previous month’s surplus of 7.0 billion reais and above market estimates that ranged from 11 billion to 13 billion reais.
In other positive news, a major investment bank upgraded a number of Brazilian stocks today, including retailer Lojas Americanas and power companies Cemig and Copel.
Also, Moody’s Investors Service upgraded the foreign currency issuer ratings of the Brazilian states of Ceará and São Paulo, and the city of Curitiba (Paraná state), to Ba2 from Ba3.
In other developments, the public’s support for the administration of President Luiz Inácio Lula da Silva rose to 38.3% in May from 37.6% in April, due largely to an improved economy, according to a public opinion poll released by the Sensus polling organization.
Elsewhere, Mexican shares sank for a sixth straight session amid continued U.S. interest-rate uncertainty and caution ahead of the Bank of Mexico’s monetary policy meeting on Friday.
Mexico’s central bank is widely expected to leave interest rates unchanged at its monthly meeting Friday. At it last meeting on April 21, the bank cut rates by 25 basis points, its ninth straight reduction, but said there was no more room for additional easing in the foreseeable future.
In local economic data, the Bank of Mexico said that the consumer price index fell 0.49% in the first two weeks of May, bringing the annual inflation rate down to 2.95% from 3.20% at the end of April. The central bank’s target rate is 3%. However, the core index rose 0.07% in the first half of May.
Argentine issues dropped, in line with regional equities. Weighing on the Merval, index heavyweight Tenaris fell amid a decline in oil prices. Bank shares also ended the day lower. Argentine markets will be closed tomorrow for a national independence holiday.
Thomson Financial – www.thomsonfinancial.com