Latin American stocks were mixed to higher, with Brazilian shares gaining on hopes the Brazilian central bank will cut interest rates at its first meeting of the year next week. Meanwhile, Mexican issues slumped on continued profit taking.
Brazil’s Bovespa Index added 117.82 points, or 0.33%. Mexico’s benchmark Bolsa Index lost 35.81 points, or 0.19%, while Argentina’s Merval Index rose 7.15 points, 0.44%.
Brazilian stocks edged up on optimism about the direction of local interest rates. Investors are hopeful that Brazil’s central bank will reduce interest rates further at its first meeting of the year next Wednesday.
The bank is widely expected to cut its benchmark Selic interest rate, currently at 18%, by at least 50 basis points. Moreover, some of investors have started to expect an even bigger cut aimed at jump starting the sluggish economy.
In corporate news, Embraer said it has been mulling the possibility of adopting a new capital structure, but added that the viability of such a move is still being determined.
The Brazilian jetmaker said that if it decides to propose a new capital structure to its shareholders, it will promptly disclose full details of the proposal to the investment community.
A major investment bank started coverage of sugar and ethanol producer Cosan SA at "equal-weight." "We see upside for the stock to BRL100 based on projected (fiscal year 2007) results, but we think investors should be prepared for 2-3 quarters of disappointing results near term," the bank said.
Meanwhile, another influential investment bank upgraded power utility Celesc to "outperform" from "peer perform," saying "Celesc represents the most significant deep value play in the sector."
Elsewhere, Mexican shares dipped as investors locked in some more of the market’s recent strong gains while also digesting today’s mixed inflation data south of the border.
The U.S. producer price index rose 0.9% in December, marking its biggest gain since September. However, the core PPI edged up just 0.1%. Economists expected the December PPI to rise 0.5% and the core PPI to increase 0.2%.
Closer to home, Telmex was in focus after an investment bank raised its price target on the phone company’s American Depositary Receipts to US$ 28 from US$ 25.60, citing expectations for macroeconomic growth in Telmex’s key markets.
Argentine issues built on recent strong gains amid continued expectations the U.S. monetary tightening cycle is close to ending. Argentine issues had come under pressure in December due to mounting local inflation and dissatisfaction with the government’s efforts to contain it.
The government has sought to fight inflation by negotiating price agreements with various industries. Today, the government signed an accord with two of the country’s major dairy producers to freeze prices on nine dairy products for at least two months. Earlier this week, it signed an agreement with cement makers to keep prices steady for 90 days.
Thomson Financial – www.thomsonfinancial.com
