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Latin American markets endured a mixed session, but Brazil helped brighten the region with an impressive rebound late in the day. Brazil initially came under considerable pressure, as the ongoing political scandal threatened to ensnare the country's President.
Mexican issues endured a bout of profit-taking and felt the pressure of U.S. market weakness. U.S. stocks tumbled on surging oil prices, disappointing economic reports and a lackluster financial release from technology titan Dell. Argentina also declined on the day.
Brazil's benchmark Bovespa Index rebounded 317.62 points, or 1.19%, while Mexico's benchmark Bolsa Index negated 95.73 points, or 0.65%. Argentina's Merval Index slumped 17.26 points, or 1.15%.
U.S. economic news disappointed. The trade deficit widened US$ 58.82 billion in June from US$ 55.4 billion in May. In addition, the University of Michigan consumer sentiment index declined to 92.7 in August from 96.5 in July.
Brazilian shares posted an impressive turnaround, following steep declines earlier in the session that stemmed from investor concerns surrounding the ongoing campaign finance and cash-for-votes scandals.
Former congressman Waldemar da Costa Neto said in an interview with news magazine Época that President Luiz Inácio Lula da Silva was aware of illegal donations made by the Workers Party during his 2002 presidential campaign.
Meanwhile, in an address to the nation today, President Lula denied knowledge of the illegal campaign funding and urged his cabinet to ensure that the investigation doesn't hinder economic growth.
Also, PT President Tarso Genro admitted that the Workers Party participated in undeclared funding activities, but pledged to rebuild the party. Genro also said that President Lula should not be impeached.
Folha de S. Paulo's polling institute, DataFolha, said that a public opinion poll showed that President Lula would lose the presidential election, if held now, to his main opponent in 2002, São Paulo Mayor José Serra, by a margin of 48% to 39%. Still, only 29% of those polled supported the impeachment of Lula, while 63% support the continuation of his administration.
On the corporate front, a major investment house upgraded Banco Bradesco to "buy" from "neutral," as the broker sees the bank improving further due to its recent upbeat earnings outlook.
Separately, another investment bank lowered its price targets for wireless firms Telemig Celular to US$ 45 from US$ 48 and Tele Norte Celular to US$ 10 from US$ 12.
Mexican shares followed the U.S. markets lower, after the IPC index reached another record high yesterday. As expected, the Bank of Mexico kept the daily money market liquidity restriction, or corto, unchanged at 79 million pesos. The move follows recent economic data that showed a rebound in the consumer price index.
Argentina fell on the day, as investors are somewhat disappointed that second-quarter earnings did not yield stronger-than-expected results. Markets will be closed on Monday for a national holiday.
On the deal front, Grupo Clarin SA acquired 25% of Cablevision SA for an undisclosed amount.
In earnings news, last night, Banco Frances said that it swung to a second-quarter net profit of 30.28 million pesos from a loss of 44.62 million pesos a year ago. Still, the firm's operating profit slipped to 87.9 million pesos from 106.2 million pesos a year ago.
Thomson Financial Corporate Group - http://www.thomsonfinancial.com
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