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Latin American markets benefited from lower oil prices and continued enthusiasm for Brazil's economic prospects, although a lukewarm performance from U.S. equities weighed on Mexico.
Brazil's benchmark Bovespa Index rose 615.68 points, or 2.01%, while Mexico's benchmark Bolsa Index fell 11.80 points, or 0.08%. Argentina's Merval Index added 6.46 points, or 0.39%.
Brazilian shares recovered from yesterday's round of profit-taking to finish at a new record close, above the key level of 31,000. Enthusiasm from foreign investors for the country's upbeat economic prospects continued to sustain equities' run-up.
Brazil's Finance Minister noted today that the country's monetary policy is likely to be "less restrictive." Also, the Planning Ministry lowered its 2005 inflation forecast to 5.29% from 5.57% for 2005 and anticipates interest rates of 19.04%, down from 19.15%, by year's end. The ministry kept its GDP outlook of 3.4% growth.
In company news, Brasil Telecom was active on a news report that a long ownership dispute had been resolved. The report explained that representatives of Citigroup, three major Brazilian pension funds and Telecom Italia had agreed on a plan for the latter company to take control of Brasil Telecom. However, in the afternoon, the Brazilian unit of Telecom Italia stated that no agreement had been reached.
Elsewhere, Brazil's antitrust division found three steelmakers guilty of price fixing and dividing up the domestic market for steel rebar. The firms were Gerdau, Belgo-Mineira and Barra Mansa. They were assessed a fine of 7% of gross revenue for 1999, the year the original complaint was brought.
In other news, Brazilian airline Varig, which has filed for bankruptcy, reported a net loss of 594.2 million reais for the first eight months of 2005, versus a loss of 574.8 million reais in the year-ago period. Revenue rose slightly.
Mexican issues, meanwhile, eased back, in tune with the U.S. market, although the latter partially erased losses late in the session, due to a decline in oil prices.
On the economic front, Bank of Mexico eased the overnight rate by 25 basis points to 9.25%, while leaving the corto unchanged. Also, the trade deficit widened to US$ 721 million in August from US$ 622 million in July, much more than the anticipated gap of US$ 381 million.
In research, a major investment bank cut Grupo Televisa SA to "equal weight" from "overweight," saying the stock will likely follow the performance of the broader Mexican market in the near term.
In other reports, Arca's controlling shareholders sold 24.2 million shares in the open market, or 3% of the company's shares, in a bid to meet requirements that 12% of a company's capital be in public hands.
Separately, shares of cement maker Cemex were also active. U.S. and Mexican trader officials were meeting to negotiate or eliminate tariffs on Mexican exports to the U.S.
In M&A news, Grupo Bimbo closed its planned acquisition of El Globo bakery for 1.35 billion pesos from Grupo Sanborns.
Argentine stocks edged up, building on recent gains, amid little corporate or economic developments. Of note, the International Monetary Fund stated it had no "fundamental" differences with Argentina's government over economic policy and was waiting for President Kerchner's team to present their agenda. Meetings are scheduled next week.
Thomson Financial Corporate Group - www.thomsonfinancial.com
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