Brazil’s Lower Surplus Helps Stocks to Cool Down

Latin American shares ebbed, as Brazilian investors concentrated on Thursday’s U.S. interest rate decision, while Mexico faltered ahead of its own tight presidential election this weekend. Argentina managed a rally, although trading volume was thin.

Brazil’s Bovespa Index receded 29.98 points, or 0.09%. Mexico’s benchmark Bolsa declined 54.33 points, or 0.29%, while Argentina’s Merval Index rallied 32.03 points, or 2.02%.

Brazilian shares edged lower today in what is expected to be a cautious week ahead of Thursday’s U.S. FOMC meeting on interest rates. In local economic reports, the Ministry of Trade and Development said the country posted a US$ 515 million foreign trade surplus in the fourth week of June, down from US$ 654 million the prior week. The year-to-date surplus now sits at US$ 17.944 billion, below the US$ 18.970 billion tallied in the year-ago period.

On the M&A front, steelmaker Arcelor Brasil was active, after its parent firm Arcelor agreed to merge with Mittal Steel, a Dutch-based firm. Mittal sweetened its bid for Arcelor to US$ 33 billion, and will control 43.6% of the combined firm.

Mexican issues also dipped on the day; although, the country’s own presidential elections this Sunday likely eclipsed concerns about U.S. interest rates.

Mining firms received a boost on major M&A activity. U.S. copper giant Phelps Dodge announced an agreement worth about US$ 40 billion for two Canadian mining companies, Inco and Falconbridge. If the deal is completed, it would create the largest mining firm based in North America.

Closer to home, Grupo Mexico intends to challenge an antitrust ruling that blocks the merger of its Ferromex rail firm with Ferrosur.

Argentine issues bucked the broader downward trend, instead opting to rally. Tenaris, which accounts for about a quarter of the Merval index, was boosted by a jump in crude oil prices.

In economic reports, industrial production jumped 7.3% in May from a year ago, according the national statistics agency, Indec. Production advanced 0.9% on a monthly basis.

Thomson Financial – www.thomsonfinancial.com

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