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GDP Growth Gives Brazilian Stocks a Boost

Shares in Brazil were up sharply on strong economic data; however, Mexican stocks extended yesterday’s losses. Meanwhile, several Argentinean banks received upgrades from Moody’s on improving fundamentals.

Brazil’s Bovespa Index added 117.53, or 0.32%. Mexico’s benchmark Bolsa Index fell 163.42, or 0.87%, while Argentina’s Merval Index gained 15.71, or 0.96%

Brazilian stocks posted solid gains on pleasing economic data. Brazil’s Census Bureau reported that Brazil’s first-quarter economic growth was greater than expected due to a recovery in industry and services on increased domestic consumption.

First-quarter GDP rose 3.4% compared with the year-earlier period, which was faster than the 1.4% expansion in the fourth quarter and above the 2.7% median estimate of economists polled by Dow Jones Newswires.

In corporate news, shares of Brazilian mining giant Companhia Vale do Rio Doce, or CVRD, declined after China’s Xinhua news agency said local steelmakers rejected a 19% hike in iron ore prices. Shares were down on the Bovespa.

But CVRD denied reports that it had halted iron ore shipments to China due to the dispute over 2006 price contract negotiations. "Iron ore shipments to China are normal," a CVRD spokeswoman said. Shares ended the session higher.

In sector action, Brazilian energy stocks were among the advancers, with Petrobras, CESP, Electropaulo and Cemig all rising. Banking shares were also higher, with Itaú, Bradesco and Unibanco all posting gains. Elsewhere, heavyweight telecom Telemar also advanced.

After meeting Brazilian President Luiz Inácio Lula da Silva in Brazil, European Commission President Jose Manuel Barroso said a breakthrough in the stalled Doha round of World Trade Organization multilateral trade talks may be at hand.

"There are economic reasons prompting us to defend vigorously that there will be a compromise. We are possibly close to reaching a deal in the Doha round," Barroso said in televised remarks.

Elsewhere, Mexico gave up early session gains to end lower following yesterday’s drubbing. The benchmark IPC index had tumbled more than 650 points Tuesday, as selling resumed across emerging markets and in the U.S. on fears of higher global interest rates.

Soft-drink bottler Arca was in focus after Deutsche Bank raised it from "hold" to "buy." Last week, the company called off plans to buy a stake in processed-food concern Grupo Herdez SA, and Deutsche Bank said the outlook for Arca’s dividend distribution has improved.

Lending support to Argentina’s market, several Argentine banks were upgraded by Moody’s Investors Service to reflect the banks’ improving financial fundamentals and the recovery of the banking system since the financial crisis of 2001-2002. Moody’s upgraded Banco Rio de la Plata S.A., BBVA Banco Frances S.A., Banco Credicoop Cooperativo Limitado and Banco de Valores S.A. to D- from E. The outlooks on these ratings are stable.

Thomson Financial – www.thomsonfinancial.com

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