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Bolivia’s Oil Nationalization Can’t Stop Brazil from Reaching Record High

Latin American stocks bounced higher, after a long holiday weekend. Monday, May 1st, Brazilian, Mexican and Argentinean markets were closed for the May Day holiday. Brazilian investors chose to ignore Bolivia’s surprise decision to nationalize its oil and gas industry, which could impact select firms with interests in the country, as well as markets that import oil and gas from Bolivia.

Brazil’s Bovespa Index surged 653.16 points, or 1.62%. Mexico’s benchmark Bolsa Index advanced 433.68 points, or 2.10%, while Argentina’s Merval Index edged up 1.19 points, or 0.06%.

Brazilian shares leapt past the 41,000 mark and reached a record high, thanks to foreign investor inflows. Investors shrugged off concerns regarding Bolivia’s move to nationalize its oil and gas industries, which will entail foreign firms signing new contracts.

Brazil receives 50% of its natural gas from Bolivia, and Petrobras, Brazil’s state-run energy firm, is a major investor in Bolivia where it operates two refineries.

In upbeat economic reports, the Ministry of Development, Industry and Foreign Trade said that the country posted a foreign trade surplus of US$ 3.1 billion in April, boosting the surplus so far this year to US$ 12.44 billion.

Turning to the financial sector, Banco Itaú rallied, after the company confirmed that it will buy the Brazilian assets of BankBoston. Banco Itaú also has the exclusive rights to buy the firm’s operations in Chile and Uruguay.

Separately, a major investment firm downgraded Banco Do Brasil to "peer perform" from "outperform" due to the stock price’s recent appreciation.

Mexican shares traded similarly to Brazil, reaching record highs on the day. Investors are anticipating strong quarterly earnings from America Movil, which is due out this evening.

Copper mining firm Grupo Mexico edged higher. This past weekend, workers at the firm’s lead and zinc mine in Taxco ended a week-old strike; although, strikes at its copper mine La Caridad and zinc mine in Zacatecas state continued.

Elsewhere in the sector, Industrias Penoles said that stronger metals production and higher prices helped the firm to double its first-quarter net profit to 1.14 billion pesos from 567.9 million pesos a year ago. Sales surged to 6.92 billion pesos from 5.09 billion pesos.

ICA said that its first-quarter net profit surged, partly due to its increased stake in GACN. The engineering and construction firm’s profit rose to 130.9 million pesos from 70 million pesos in the year-earlier period. Sales advanced 11% to 4.62 billion pesos, and operating profit leapt 72% to 354.4 million pesos.

Argentine issues did not partake in the broader regional rally, but instead settled for a slight uptick. Investors are awaiting the kick-off to the country’s own earnings season, which is not set to begin until next week.

Thomson Financial – www.thomsonfinancial.com

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