Latin America collectively moved higher on the day, with Brazilian and Mexican markets hitting record highs. Brazilian investors were anxiously awaiting the central bank’s decision on interest rates. Argentina also moved higher, following recent weakness.
Brazil’s benchmark Bovespa Index leapt 209.82 points, or 0.63%, while Mexico’s benchmark Bolsa Index rallied 234.35 points, or 1.32%. Argentina’s Merval Index rebounded 10.15 points, or 0.67%.
Brazilian shares posted solid gains on the day with stocks closing at a record high ahead of an expected interest-rate cut by the Central Bank, with some analysts anticipating a cut by up to a full percentage point.
At the end the Central Bank lowered the overnight interbank rate by half percent bringing it to 18%. With this cut, the Selic base rate has come down 1.75 percentage points from a two-year high of 19.75 percent in September.
In other economic data, the Brazilian Census Bureau, or IBGE, said that October retail sales edged up 0.06% on a seasonally adjusted basis, compared to September. The result was below analyst expectations. Retail sales jumped 3.74% in October, compared with the year-ago result.
Meanwhile, the Ibope, the Public Opinion Research Institute said that approval for the Workers’ Party government fell to 42% in December from 45% in September, according to a poll. Personal approval for President Luiz Inácio Lula da Silva declined to 43% in December from 44% in September, when the poll was last taken.
Turning to corporate reports, low-cost airline Gol officially signed a deal to create a joint venture with Mexican business executive Fernando Chico Pardo and a group of partners to launch a low-cost airline in Mexico next year.
Retailer CBD moved lower, after U.S.-based Wal-Mart Stores bought Portuguese retailer Sonae’s Brazilian unit for 635 million euros.
Elsewhere, fixed line operator Telesp announced its intentions to increase investment to 1.7 billion reais in 2006 from this year’s 1.3 billion investment, as the firm expands its broadband and video services.
Mexican stocks broke through the 18,000 point level for the first time, amid upbeat sentiment on falling interest rates. Similarly, U.S. markets continued to benefit from buzz that the Federal Reserve may stop raising interest rates sooner than expected.
In corporate news, government-owned airline holding firm Cintra reaffirmed its plans to sell remaining airline AeroMexico in the short term.
Meanwhile, the Mexican Senate approved changes in the country’s energy laws, which will now allow Pemex to produce and sell electricity. The firm will be able to produce electricity through a process known as cogeneration and then sell it to CFE and LFC, two other state-run power utilities.
Argentina finally managed a rebound following a string of declines. Investors indulged in some bargain hunting and were enthused by broader regional gains.
Finally, Spanish-Argentine energy firm Repsol YPF announced its intention to increase the amount it invests in Argentina between 2005 and 2009 by US $700 million to US $6.7 billion. The money will partly be used to expand installed capacity at its refineries in La Plata, Lujan de Cuyo and Plaza Huincul.
Thomson Financial Corporate Group – www.thomsonfinancial.com