Brazil Rebounds on Low Inflation News

    Brazilian shares turned around, following losses posted across the board yesterday. Investors are still anticipating Thursday’s, June 29, release of the U.S. Federal Reserve’s decision on interest rates. The Fed is widely expected to raise rates by 25 basis points.

    Brazil’s Bovespa Index jumped 458.92 points, or 1.34%. Mexico’s benchmark Bolsa rose 80.36 points, or 0.45%, while Argentina’s Merval Index rallied 33.53 points, or 2.10%.

    Brazilian issues bounced back today, as investors cheered a benign inflation report released by the Central Bank. For its second-quarter inflation report, the bank raised its estimate for the IPCA inflation index to 3.8% for 2006 from 3.7%. For 2007, the index was lifted to 4.2% from 3.9%.

    State-controlled Banco do Brasil rallied on its first day of trading on the Novo Mercado Mechanism on the Bovespa. Brazil’s largest bank completed the sale of 45.44 million common shares today, which raised 1.97 billion reais before migrating its shares to the Novo Mercado Mechanism.

    Turning to brokerage notes, a large investment house raised its earnings estimates for Petrobras and its Argentine unit Petrobras Energia, as the bank expects oil prices will continue to rise.

    Wireless provider Vivo was removed from a major investment bank’s focus list, partly due to disappointing earnings and guidance, and replaced with rival Tim Participações.

    In deal news, Colombia’s Interconnexion Electrica, or ISA, bought a controlling share in Brazil’s electric power transmission firm Cteep for 1.19 billion reais at an auction on the Bovespa.

    Mexican shares witnessed more muted gains on the day, as investors await Sunday’s tight presidential election. Trading volume was low and is expected to remain so until after the elections.

    Argentina bounced back from yesterday’s declines alongside broader regional gains. There were few economic or corporate reports to direct trading activity.

    Thomson Financial – www.thomsonfinancial.com

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