Worries About Halt on Rate Cuts Lower Brazilian Shares

Brazilian shares moved lower Tuesday, June 20, amid uncertainty over domestic and overseas monetary policy. Argentine shares also went down, while Mexico bounced back from sharp declines Monday.

Brazil’s Bovespa Index receded 265.21 points, or 0.78%. Mexico’s benchmark Bolsa jumped 199.40 points, or 1.13%, and Argentina’s Merval Index tumbled 28.25 points, or 1.79%.

Brazilian investors are increasingly wary about monetary policy, with some saying the Brazilian Central Bank may call a halt to its recent monetary loosening policy.

A pause in rate cuts could come as a response to recent emerging-market volatility, they said. Brazil’s Selic base interest rate is currently 15.25%, despite eight consecutive rate cuts.

In economic news, the Fipe research foundation said that the consumer price index for São Paulo fell 0.50% in the four weeks ended June 15, compared with a 0.38% decline in the four weeks ended June 7. The most recent fall was sharper than expected by analysts.

In corporate reports, CVRD rose, after Chinese steelmakers agreed to a 19% iron-ore price increase with BHP. A similar deal is expected to be announced by CVRD later this week.

Elsewhere, Mexican stocks recovered today, rising sharply in midday trading, after starting the week under heavy selling pressure. Mexican stocks had been under pressure, along with other emerging-market assets, amid fears of rising global interest rates. Meanwhile, investors are also looking forward to the Bank of Mexico’s monthly policy meeting this Friday, in which the overnight lending rate is expected to remain unchanged.

On the corporate front, Cemex climbed, after a major investment bank initiated coverage of the cement giant at "overweight," saying the company’s long-term growth potential isn’t reflected in the price and that the recent selloff presents a good buying opportunity.

Argentine shares slid as the local market played catch-up after being closed for a national holiday Monday. There were few financial news items available to steer trading today. Trading volume remained low.

Thomson Financial – www.thomsonfinancial.com

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