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Latin American markets advanced across the board, alongside U.S. market strength. Helping to bolster both the domestic and U.S. markets were comments from the U.S. Federal Open Market Committee relating to "contained" U.S. inflation, which could lead to a slowdown in future interest rate hikes.
Brazil witnessed the most notable gains amid some upbeat corporate reports. Mexico and Argentina also posted healthy gains.
Brazil's benchmark Bovespa Index surged 580.25 points, or 2.17%, while Mexico's benchmark Bolsa Index advanced 76.57 points, or 0.52%. Argentina's Merval Index rose 10.04 points, or 0.67%.
In major U.S. economic reports, as expected, the FOMC raised interest rates for the 10th consecutive time by a quarter point to 3.50%. Separately, non-farm business productivity grew a stronger-than-expected 2.2% in the second quarter, down from a revised 3.2% rate in the first quarter.
Brazilian issues led the broader market advance. The country's second-quarter earnings season is well underway, with some market heavyweights, including CVRD and CSN, releasing results tonight and tomorrow. Also, Brazil, a net importer of crude oil, benefited from receding oil prices, which finished at the low end of US$ 63 a barrel.
Turning to economic reports, the IPCA Broad Consumer Inflation Index advanced 0.25% in July, compared to a 0.02% fall in June. Higher fuel prices and telephone fees were cited for the latest uptick in consumer prices.
In major corporate earnings reports, CBD said that its second-quarter net profit rose more than 10% to 64.2 million reais from 58.2 million reais a year ago, partly due to cost-cutting measures. Brazil's largest supermarket owner said that EBITDA rose to 291.5 million reais from 255.0 million a year ago, while net revenues advanced to 3.16 billion reais from 3.06 billion reais.
Meanwhile, mobile phone firm Telemig announced a 5% advance in its second-quarter net profit to 41.77 million reais from 39.71 million reais last year, while net revenue declined to 288.3 million reais from 304.8 million reais. EBITDA also fell to 108.1 million reais from 124.9 million reais. Telemig said that its average revenue per user fell to 26.9 reais per month during the second quarter from 35.8 reais a year earlier.
In other corporate reports, state-run oil firm Petrobras will raise its international oil and gas output to 350,000 barrels of oil equivalent a day by 2009 from a current rate of 260,000 BOE, according to the Agência Estado newswire. Petrobras will achieve this rate through boosting its activities and investments in Nigeria.
Mexican issues also witnessed another positive session, bolstered by strength in U.S. markets. Still, inflation concerns curtailed some of the country's initial gains. The Bank of Mexico reported that the Consumer Price Index jumped 0.39% in July after falling 0.10% in June and rising 0.26% in the year-earlier period. Annual inflation now stands at 4.47% from 4.33% at the end of June. Rising fruit and vegetable prices played a part in last month's rise in consumer prices.
Also, a positive brokerage note on a major wireless phone company boosted the key IPC index. America Movil's price target for its American Depositary Receipts was raised to US$ 28 by mid-2006 from US$ 22.50 at the end of 2005 due to stronger-than-expected second-quarter results. The broker also said America Movil gained market share due to strong subscriber growth.
Argentina turned positive, following two straight session declines. Still, trading volume took a steep fall. In earnings news, packaged food producer Molinos swung to a first-half net profit of 35 million pesos, reversing a year-earlier net loss of 11.7 million pesos. Revenue totaled 1.23 billion pesos, while operating profit advanced to 30.3 million pesos in the first half from 7.6 million pesos.
Thomson Financial Corporate Group - www.thomsonfinancial.com
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