Latin American markets were mixed to lower, with Brazilian and Mexican issues slumping on profit taking. However, the Bovespa’s losses were limited by upbeat inflation forecasts, while gains in U.S. equities helped to stem selling pressure in Mexico.
Brazil’s benchmark Bovespa Index fell 108.42 points, or 0.35%, while Mexico’s benchmark Bolsa Index dropped 27.49 points, or 0.17%. Argentina’s Merval Index jumped 22.11 points, or 1.31%.
Brazilian stocks ended lower, reversing initial gains that followed upbeat inflation forecasts. The central bank said today in its third-quarter report on inflation that Brazil’s IPCA consumer price inflation should end 2005 at 5.0% and drop to 3.5% by the end of 2006.
That is down from 5.8% and 3.7%, respectively, forecast in the bank’s June inflation report. The government has set official IPCA inflation targets of 5.1% for this year and 4.5% for 2006 and 2007. The central bank maintained its projection for 2005 economic growth at 3.4%.
Meanwhile, the Getúlio Vargas Foundation (FGV) said its General Price index, or IGP-M, declined 0.53% in September following a 0.65% drop in August. September was the fifth-consecutive month the price index had fallen. The IGP-M result was in line with market expectations.
In other data, the government’s statistics institute IBGE said Brazil’s gross domestic product in nominal terms in the second quarter of 2005 reached US$ 213 billion (480.40 billion reais). That compares to first quarter GDP of US$ 194 billion (438.22 billion reais) and year-ago GDP of US$ 212 billion (478.34 billion reais).
Also, the Brazilian Supermarkets Association reported that supermarket sales declined in August by 0.66% in real terms compared with the same month a year ago. Compared with July, sales plunged 2.42% in August. The drop was attributed to current high interest rates and calendar differences.
In corporate news, Petrobras’ board approved a pre-accord to jointly develop, with Venezuela’s PdVSA, the Mariscal Sucre natural gas project in Venezuela.
Elsewhere, Mexican stocks dipped, as investors locked in some profits following three straight record closes. Helping to limit losses, U.S. shares rose amid solid economic growth data. The U.S. final reading for second- quarter gross domestic product was 3.3%, unchanged from the prior reading and down from 3.8% in the first quarter.
On the corporate front, Mexican businessman Carlos Slim said he still does not know whether his telecom firm Telefonos de Mexico SA will continue bidding for Colombian carrier Colombia Telecomunicaciones. Telmex had agreed in August to invest $350 million in Colombia Telecom for a stake of 50% plus one share.
However, Colombia Telecom said yesterday it won’t sign a memorandum of understanding with Telmex and will instead open a bidding process.
Argentine issues rose for a fifth-straight session, helped by strength in a host of steel stocks, including Tenaris, Siderar and Acindar.
Thomson Financial Corporate Group – www.thomsonfinancial.com