Disappointing Economic Data Chill Brazilian Stocks

Latin American shares fell on concerns that the U.S. Federal Reserve may continue to raise interest rates after hawkish comments by Fed Chairman Ben Bernanke on Monday, June 5.

Bernanke warned that the Fed must be vigilant to ensure inflation remains in check, even if economic growth starts to slow.

Brazil’s Bovespa Index dropped 182.06 points, or 0.50%. Mexico’s benchmark Bolsa Index fell 156.64 points, or 0.83%, while Argentina’s Merval Index lost 5.44 points, or 0.33%.

Brazilian stocks ended the session lower amid continued worries that the U.S. Federal Reserve will extend its monetary tightening cycle longer than previously expected. Shares were also pressured by disappointing local economic data.

Official data released today showed that industrial production in Brazil held steady in April from March and fell a surprising 1.9% from April 2005.

Meanwhile, motor vehicle production and exports reached their highest-ever levels in May as automakers took advantage of seasonal factors, the Brazilian Motor Vehicle Manufacturers Association, or Anfavea, reported.

Auto production for the month reached 245,179 units, up 20.1% from April. May was the single-best production month ever for Brazilian automakers, representing an increase of 10.4% against May 2005.

Elsewhere, Mexican shares continued their decline, with losses spread across nearly every industry. Shares of wireless phone company America Movil gave up early gains following Deutsche Bank’s upgrade of its shares to "buy" from "hold".

Shares of fixed-line phone company Telmex declined, as did those of copper miner Grupo Mexico. Shares of Mexico’s largest retailer, Wal-Mart de Mexico, saw a substantial decline as well.

Shares of cement maker Cemex were also down following an announcement late Monday that 97.4% of shareholders had received new shares in lieu of cash as part of the company’s dividend program, resulting in the issuance of 105.9 million CPOs.

Elsewhere, Argentina’s Merval Index was lower, extending Monday’s 2.5% loss.

In corporate news, shares of Quilmes Industrial SA, the country’s largest brewer, declined as an analyst questioned the stock’s strength and downgraded its rating.

On April 13, InBev SA, the world’s biggest beer producer, paid US$ 1.2 billion to raise its stake in Luxembourg-based Quilmes Industrial, which is also the largest brewer in Bolivia, Paraguay and Uruguay.

InBev brews the Belgian lager Stella Artois and Germany’s Beck’s and was formed in August 2004 when Belgium’s Interbrew combined with Latin America’s major brewer AmBev in an US$ 11.4 billion deal.

Thomson Financial – www.thomsonfinancial.com

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