Monetary Easing in US Brings Record Day to Brazil’s Market

    Latin American stocks powered higher, led by Brazilian shares, on indications the U.S. Federal Reserve is close to ending its interest-rate hiking campaign.

    Brazil’s Bovespa Index surged 1109.99 points, or 2.89%, while Mexico’s benchmark Bolsa Index advanced 187.73 points, or 0.96%, and Argentina’s Merval Index jumped 26.33 points, or 1.39%.

    Brazilian stocks rallied, with the Bovespa surpassing an all-time high, as investors were cheered by tame minutes from the U.S. Federal Reserve’s last interest-rate meeting as well as a drop in U.S. Treasury yields.

    The minutes suggested that the Fed’s current cycle of monetary tightening is nearing an end. "Most [FOMC] members thought that the end of the tightening process was likely to be near and some expressed concerns about the dangers of tightening too much, given the lags in the effects of policy," the summary of the March 27-28 meeting said.

    Higher U.S. interest rates tend to divert investment flows away from emerging markets like Brazil.

    Meanwhile, investors also remained optimistic about the local interest- \rate outlook. Brazil’s central bank is widely expected to extend its run of interest rate cuts at tomorrow’s policy meeting with a reduction of 75 basis points to the Selic rate. Interest rates currently stand at a lofty 16.5%.

    Adding to positive sentiment, Brazil’s Planning Ministry indicated in budget guidelines that it expects Brazil’s primary budget surplus to be maintained at 4.25% of gross domestic production through 2009 amid a continuation of austere fiscal policies.

    In corporate news, oil giant Petrobras said that its board approved the conversion of all shares of its petrochemicals unit Petroquisa into Petrobras shares.

    Petrobras already owns 99% of Petroquisa’s shares. Separately, a major investment bank raised its year-end price target for Petrobras to US$ 105 from US$ 98, "on the back of strong refining margins expected in 1H06."

    Elsewhere, Mexican shares jumped, in line with regional equities, on optimism about U.S. interest rates. Mexico’s bolsa was also supported by continued hopes for a strong first-quarter earnings season, which is expected to gain steam this week and next with a flood of quarterly reports.

    Among individual shares, mining company Grupo Mexico was in focus as a nearly month-long strike continued at its La Caridad copper mine. Last week, the company declared force majeure on copper shipments due to the strike.

    The company said yesterday that it can meet its April commitments, but could have problems next month if the walkouts persist. Grupo Mexico also said yesterday that a continued strike at its zinc mine in Zacatecas may prevent it from meeting orders for refined zinc next month.

    Argentine issues followed Latin American markets higher on expectations for a near-term end to the U.S. monetary tightening cycle. Lending additional support, a monthly survey released by the Argentine central bank showed that economists expect robust economic growth in February.

    According to the survey, the median forecast among economists is for Argentina’s economic activity to have grown 8.3% in February from a year earlier. While that is down from January’s 9.1% growth, it still suggests continued economic strength.

    Thomson Financial – www.thomsonfinancial.com

    Tags:

    • Show Comments (0)

    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

    Rains in Brazil

    Brazilian Flood: 116 Dead and No Place to Rebuild

    "This is the worst climatic tragedy of Santa Catarina's history," said governor Luiz Henrique ...

    Foreign Tourism Grows 10% and Hits New Record in Brazil

    Foreign tourists who visited Brazil during the month of February generated a turnover of ...

    Lula Promises to Make Brazil an OPEC Member and World’s Greatest Energy Power

    Brazilian President Luiz Inácio Lula da Silva promised an "energy revolution" that will make ...

    Brazil Takes Agricultural Technology to Africa

    Brazil’s Minister of Agrarian Development, Miguel Rossetto, is participating, this weekend, in the First ...

    US Hispanic Caucus Calls in Brazil for LatAm’s Debt Cancellation

    Fifteen members of the Congressional Hispanic Caucus in the United States Congress sent a ...

    Vidas Secas, Barren Lives, by Nelson Pereira dos Santos

    Barren Lives, a Masterful Paradigm of Brazil’s Failure of Hope

    The 1963 classic film Vidas Secas (Barren Lives), by director Nelson Pereira dos Santos, ...

    Sugar, Beef and Cachaça Are the Staples of Brazilian Trader Blooming

    The trading company Blooming International, from São Paulo, in the southeast of Brazil, plans ...

    Brazil Risk Was Never That Low: 206 Points

    The US’s Central Bank announcement yesterday that it would keep basic interests rates unchanged ...

    Brazil: EU and Mercosur Push for Free Trade Pact

    Negotiators from the European Union and Mercosur have decided to begin a concentrated effort to ...