By Carla Mozee
Most Latin American equities closed lower on Friday, largely
tracking movement on Wall Street where job losses in the U.S.
continued to climb last month.
Brazilian shares lost their grip on earlier gains, although
anticipation grew for a big interest rate cut in the wake of poor
industrial production figures. The Bovespa was down 0.7% to
37,096.74.
In Mexico, the benchmark equity index fell 1.9% to 37.105.09,
with shares of Cemex SAB (CX) down 5.4%, extending losses from the
prior day on concerns about the cement maker's planned issuance of
bonds.
Equities in Mexico on Friday had been halted for about half an
hour because of a technical problem on the exchange.
Chile's IPSA fell 1% to 2,360, while Argentina's Merval rose
1.1% to 957.10.
The indexes finished off their lows of the session as stocks on
Wall Street staged a late turnaround, leaving the S&P 500 Index
up 0.1% and the Dow Jones Industrial Average up 0.5%.
In Brazil, industrial production for January rose 2.3%, compared
with the 12.4% decline in December, said the Brazilian Census
Bureau. The January figure was considerably below the consensus
estimate for a rise of 8.5%, according to Itaú Securities.
The year-over-year contraction was 17.2%, the worst showing
since February 1991. In December, the on-year decline was
14.8%.
In afternoon trades, the iShares MSCI Brazil Index Fund (EWZ),
an exchange-traded fund, pared losses to end down 0.2%.
The industrial production report arrived before Brazil's central
bank meeting on Tuesday and Wednesday, and market professionals
have held to their outlook for a cut in the Selic rate, which
currently stands at 12.75%.
A Dow Jones Newswires survey of 18 analysts released Friday
shows that 15 of them foresee a rate cut of 100 basis points, or a
full percentage point. Such a move would match the size of the
bank's rate cut in January.
Win Thin, senior currency strategist at Brown Brothers Harriman,
said the risk for a larger cut is rising, and he now expects
policymakers to slash the rate by 150 basis points to 11.25%. A cut
of that size occurred in 2003, said Thin in a note Friday.
"While inflation remains stubbornly high, we think the focus of
policy-makers is firmly on avoiding a deep downturn," he said.
Brazil's currency, the real, weakened after the report, and was
off 0.3% at 2.374 versus the U.S. dollar from Thursday.
Shares of interest-rate sensitive banks were higher. Federally
run Banco do Brasil rose 2%, Banco Bradesco (BBD) gained 2.3%,
Unibanco (UBB) rose 1.1% and Itau (ITU) rose 1.4%.
Meanwhile, shares of Petrobras (PBR) fell 1.3%. The oil giant is
slated to post fourth-quarter earnings Friday evening, and analysts
expect a decline because of lower oil prices.
Analysts polled at Dow Jones Newswires currently expected net
earnings of 7.69 billion reals on revenue of 52.7 billion reals.
EBITDA is projected to fall to 10.6 billion.
Ahead of the report, the company said it hit a record for daily
domestic oil production of 2.012 billion barrels of oil. The
record, set on Wednesday, was reached largely because of activity
on three new production platforms.
In other developments, Brazilian President Luis Ignacio Lula Da
Silva is scheduled to meet U.S. President Barack Obama in
Washington on March 14, according to the White House.
The meeting comes before Obama travels to London for the Group
of 20 economic summit in London on April 2, and to Trinidad for the
Summit of Americas in April, set for April 17 through 19.
Latin American stock indexes had surged earlier this week on
hopes that China would bulk up its $585 billion economic stimulus
plan, but losses set in afterward when China said it expects growth
of 8% in 2009, signaling that it wouldn't take on further spending
projects aimed at spurring activity.
For the week, the Bovespa fell 2.8%, the IPC and IPSA declined
4%, and Argentina fell 5.3%.
Earlier Friday, investors in regional markets and on Wall Street
examined a report from the U.S. Labor Department that the economy
lost 651,000 jobs in February, pushing the unemployment rate to its
highest in more than 25 years, to 8.1%. The government also revised
higher the number of losses seen in January and December.
"From an employment perspective, this is already the deepest
U.S. recession since 1958 and we've yet to see the pace of job
losses slow," wrote economist Benjamin Reitzes at BMO Capital
Markets on Friday.
Citigroup said weakening in the Mexican economy as the U.S.
languishes in recession, and the performance of the Mexican stocks
have contributed to its decision to cut its year-end target for the
IPC, to 20,000 points from 24,000 points.
"We also still expect an upside breakout for the region later
this year, when the U.S. economy bottoms out," said Citigroup Latin
American strategist Geoffrey Dennis in a note to clients. "However,
we may now have to wait longer for this, most likely now until
after mid-year."
Citigroup expects the Mexican economy to contract 2.4% in 2009.
The IPC is down 24% from the end of year last.