Expected Lower Interest Rates in Brazil Weaken Financial Firms

    Latin American markets moved lower, led by declines in Brazil, as profit-taking continued. Mexican issues witnessed more modest declines, while investors await an expected rate cut tomorrow.

    Meanwhile, Argentina’s market was closed for a holiday. Also, U.S. stocks closed lower Thursday, partly due to worries about weak energy supplies and unusually cold winter weather. Crude oil prices strongly advanced on the day.

    Brazil’s benchmark Bovespa Index fell 276.75 points, or 0.84%, while Mexico’s benchmark Bolsa Index slipped 33.17 points, or 0.19%.

    Brazilian issues tumbled on the day, after posting gains earlier in the session. Profit-taking and U.S. market weakness contributed to the day’s decline. Financial firms were particularly weak, as investors anticipate another Brazilian interest-rate cut mid-month.

    Yesterday, the president of Chinese operations of CVRD rival BHP Billiton said that CVRD is expected to lead price negotiations for ore prices in 2006.

    Meanwhile, CVRD’s chief financial officer commented that iron ore will continue to be in high demand for the foreseeable future due to growth in China, which has left a global market imbalance.

    Separately, aircraft manufacturer Embraer moved lower on the day, despite upbeat news. Colombia’s Defense Minister officially announced the purchase of 25 of Embraer’s Super Tucano jets for US$ 234 million. Embraer rose on the session.

    Mexican shares also faltered, as investors await an expected cut in the overnight rate to 8.5% from 8.75% from the Bank of Mexico. Separately, Fitch upgraded Mexico’s credit rating to one notch above its lowest investment grade.

    In major economic reports, the Bank of Mexico reported that the Consumer Price Index rose 0.72% in November, below analyst expectations. Mexico’s annual inflation rate declined to a record low last month, further supporting speculation that the central bank will cut rates tomorrow.

    Wireless phone firm America Movil declined on the session. A major investment bank commented that its valuation of the firm is "very much dependent on prevalent interest rates." The brokerage believes that lowered interest rates, country-risk premiums in Latin America, and good operating performance is what’s driving the "stock’s surge."

    Turning to financial corporate reports, a brokerage house downgraded Banorte SA to "hold" from "buy," as falling interest rates and expansion costs may hurt earnings growth. Banorte shares receded.

    Thomson Financial Corporate Group – www.thomsonfinancial.com

    Tags:

    • Show Comments (4)

    • Guest

      unusually cold weather
      it is not unusually cold weather, the northeast is warm.

    • Guest

      Linda is so hairy….
      …it takes time to get shaved, before the carnaval !

      -;-)))))

    • Guest

      Lower brazilian interests rates….
      ….dont weaken Brazilian banks because they
      have not reduced as much the rate difference at which they borrow and the rate at which they lend.

      IN FACT they are making more money.
      I can give the exact numbers on request.

    • Guest

      Get yourself up todate

    Your email address will not be published. Required fields are marked *

    comment *

    • name *

    • email *

    • website *

    This site uses Akismet to reduce spam. Learn how your comment data is processed.

    Ads

    You May Also Like

    Brazilian president Dilma Rousseff and UN secretary general Ban Ki-Moon

    Brazil President Tells UN She Wants More Power for Developing Countries

    President Dilma Rousseff criticized on September 24 the delay in providing developing countries with ...

    Down with the dictatorship, writes a tagger in 1968 Brazil

    The Military and the Rural Elite Unholy Alliance Maintains Brazil Poor and Unequal

    A very strong traditional establishment governed Brazil since its colonization. Arguably, the most powerful ...

    The Risks and Rewards of Investing in Brazil

    Is now the time to invest in Brazil, one of the world’s largest developing ...

    Housing and Clothing Lead Consumer Price Boost in Brazil

    Brazil’s Market Prices General Index, IGP-M with a strong incidence of wholesale prices, contracted ...

    For ILO, Half of Brazilian Workers Are in the Informality

    The International Labor Organization (ILO) considers worrying the situation in Brazil where there is ...

    Brazilian workers

    Brazil Not Only Out of Crisis, It’s Now Growing like China, Says Lula

    The president of Brazil, Luiz Inácio Lula da Silva said that Latin America's largest ...

    Brazilian court

    The Seemingly Futile Battle of Brazil Against Impunity

    For the Brazilian people justice is generally slow or lacking. Throughout the years there ...

    Rio Police

    Rio Police Kill One for Every 23 Arrested, in US There is One Death for 37,000

    A report by Human Rights Watch a non-governmental organization (NGO)  reveals that many killings ...

    Brazil’s Sacramento: Memorable Sound

    Marcos Sacramento made his first major statement as a solo artist in 1994 with ...

    Gang Spreads Panic in Brazil and Kills at Least 37 Police Agents

    The First Capital Command, a notorious Brazilian criminal gang unleashed a third wave of ...