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Brazil's US$ 36 Billion Surplus Helps Markets |
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Written by Beatrice Denis
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Tuesday, 01 November 2005 |
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Brazilian and Latin American markets advanced, as investors reacted positively to a string of regional earnings reports and the U.S. central bank's decision to keep its interest rate outlook unchanged.
Fears of more aggressive rate tightening from the Fed and lesser liquidity and enthusiasm for LatAm assets had recently plagued the markets.
Brazil's Bovespa Index gained 706.20 points, or 2.34%. Mexico's benchmark Bolsa Index rose 162.79 points, or 1.03%, while Argentina's Merval Index added 12.62 points, or 0.78%.
Brazilian stocks jumped, following some upbeat earnings reports. Also, on the economic front, the foreign trade surplus for October totaled US$ 3.69 billion, in line with estimates, and bringing the surplus so far this year to US$ 36.35 billion.
In company results, Banco Itaú's third-quarter profits climbed 47% from a year ago, reaching 1.352 billion reais, at the high end of market expectations ranging from 1.225 billion reais and 1.410 billion reais.
Also, low-cost airline Gol reported late yesterday that its quarterly profits swelled 42.6% from a year ago, reaching 138.2 million, well above analysts' expectations. As a result, the firm is planning to pursue aggressive expansion plans over the next several years.
In the utility sector, Cemig posted a net profit of 445.6 million reais, up 18% from last year and roughly in line with expectations. The firm cited a hike in energy rates for the robust results.
Also of note, in the energy sector, Petrobras ordered a 13.1% cut in the price of jet fuel. High prices in fuel had pressured airlines to increase their fares recently.
Meanwhile, Mexican shares advanced as well. Of note, in the U.S., Mexico's key trading partner, the Federal Reserve hiked interest rates by 25 basis points to 4%, as widely expected.
Despite inflation concerns, the central bank maintained its outlook of "measured" rate increases. Separately, the ISM manufacturing index eased to 59.1 in October from 59.4 the prior month, but surpassed targets of 57.
Homebuilders were a key source of strength today in Mexico. A major investment bank raised its price targets on Corporacion Geo and Urbi Desarrollos Urbanos, saying they offer an attractive valuation/growth profile and citing stronger-than-expected third-quarter earnings.
In other company news, Grupo Mexico unveiled plans to pay a divided of 0.42 peso a share, following its strong third-quarter results.
Also of note, Mexico's antitrust commission recommended that cable TV operators and electric utilities be allowed to offer phone service in order to improve competition.
Elsewhere, Argentine stocks edged up, in line with regional shares, amid little domestic developments. The banking sector remained in demand, possibly due to the announcement yesterday that the government is setting up "an untouchable fund" to be used to balance disruptive cycles, reported news services.
Meanwhile, in quarterly reports, Molinos' net profits leapt to 45.6 million pesos in the third period from 29.2 million pesos a year ago.
Thomson Financial Corporate Group – www.thomsonfinancial.com
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