Latin American market roundup

RIO DE JANEIRO, Jan. 23 (UPI) -- Winning sessions were scarce this week for Latin American stock markets, despite Argentina's temporary salvation courtesy of the International Monetary Fund and continuing moderate signals from Brazil's government.

The biggest culprit may be what is worrying investors around the globe: the threat of war between the United States and Iraq. This is leading Latin American markets to take cues from Wall Street even more closely.

"Given the importance of what is going on in the international scenario, our markets are really following stock markets abroad," said Carlos Firetti, director at BBV Corretora in Sao Paulo.

Disappointing news from this U.S. earnings report season did its bit to send Latin American investors floating downward, with the scattered hits of positive domestic news having little effect on equities.

Some potentially big news for markets was Argentina and the International Monetary Fund finally agreeing last week on a transitional deal that gives the country more than $6 billion in debt relief owed to the IMF through August.

But even that wasn't enough to brighten investor sentiment. The agreement was greeted as an opportunity for profit taking after a few weeks of stock gains.

Added to that, Argentina's peso has strengthened of late, leaving investors worried that inklings of economic recovery in the nation will be snuffed out, should Argentine exports become more expensive and less attractive abroad.

In Brazil, investors took profits as well after the market's nice gains of late. They also reacted poorly to an interest rate hike and the government's less-than-impressive announcement of a new Chief Financial Officer for oil giant Petrobras on Wednesday.

Jose Sergio Gabrielli de Azevedo was named to take the CFO spot at Petrobras, one of Brazil's most important and profitable companies. Analysts are worried about Gabrielli's lack of market experience. He has spent most of his career in academics. Petrobras' shares ended down more than 5 percent Wednesday.

Also on Wednesday, Brazil's Central Bank increased the Selic interest rate to 25.5 percent from 25 percent. This move came on the heels of a Tuesday announcement that the country was more than doubling its inflation forecast for this year.

Most local economists applauded both actions: The inflation forecast became much more realistic at 8.5 percent rather than the previous 4 percent, while the rate hike emphasized that the government is still serious about keeping inflation at bay.

Investors looking at the short-term picture, however, were soured by both moves.

"Our economists think (the Brazilian government) is moving in the right direction, but the market hasn't reacted positively to that," Firetti said. "The market is in a bit of a bad mood, with the expectation of war in Iraq and pressure on the foreign exchange."

The local currency -- the real -- fell back to 3.5 to the dollar Wednesday after making nice gains in the past two weeks.

As for the stock markets, Brazil's Bovespa index slipped 0.2 percent to 11,951 last Thursday in volatile trade. Telefonica Moviles and Portugal Telecom announced they were buying the cellular company Tele Centro Oeste (TCO). That news sent shares of Telesp Celular -- the Telefonica and PT's joint outfit in Brazil -- down more than 8 percent.

The index lost 2.3 percent to 11,675 Friday as the local currency weakened. Petrobras lost 4.7 percent. TCO fell 6.7 percent.

On Monday, the Bovespa ticked down 0.2 percent to 11,648 as the Martin Luther King Jr. holiday in the United States muted trading. Petrobras lost 0.6 percent as investors continued to worry about the effect a war in Iraq would have on oil prices.

Tuesday saw the Bovespa down 1.8 percent at 11,434 as the real continued to fall. Telemar lost 3.5 percent as Petrobras fell 1 percent. Aircraft manufacturer Embraer went against the grain, gaining 2.5 percent.

The index fell 2.56 percent to 11,142 on Wednesday, as the rate hike and Petrobras news dampened the day. Banks were hit hard by the rate increase as investors worried that demand for loans would drop. Bradesco, the country's largest private financial institution, shed nearly 6 percent.

In Mexico, the IPC index ended last Thursday down 1.1 percent at 6,332. Telecoms were hit hard. Fixed-line phone company Telmex lost 1.8 percent after a ruling by an antitrust commission that the company used the practices of a monopoly in the long-distance market. Wireless operator America Movil shed 1.2 percent.

Friday brought a loss of 2 percent to 6,204 as the peso hit four-year lows. The specter of the United States going to war with Iraq spooked investors, as did a decline in U.S. industrial production. Telmex lost 2.5 percent.

The IPC lost for its fourth day in a row Monday, slipping 0.7 percent to 6,161 in light trade due to the U.S. holiday. America Movil fell 1.6 percent.

On Tuesday, the index fell 1.1 percent to 6,092 as poor corporate news soured investors. Cement maker Cemex lost 5.6 percent after saying that its earnings in 2002 fell 15 percent from the previous year. Walmex lost 2 percent.

On Wednesday, the index lost 1.12 percent to 6,024. America Movil lost nearly 4 percent while Telmex shed 2.8 percent. Industrial group Alfa lost 1.15 percent.

Argentina's Merval index rose 1.64 percent to 597 Thursday as investors sensed a deal with the IMF would be announced shortly -- which it was after the bell. Steel company Siderar ended up 4.6 percent. On Friday, the index lost 3.24 percent to 577, despite news of debt relief from the IMF. Profit taking was blamed after recent broad gains by the index.

Monday brought a small loss to 576. Automaker Renault bucked the trend, gaining 3.7 percent. Tuesday saw the Merval fall to 563, as a strengthening peso led investors to take profits in exporters.

Wednesday brought a gain of 1.05 percent to 569. Steelmaker Acindar added nearly 6 percent, while utility Central Puerto grew 4.2 percent. Grupo Financiero Galicia, which controls the country's largest bank, gained 2 percent.

In Chile, the IPSA index ended Thursday down 0.9 percent at 1,019. Utility Enersis lost nearly 4 percent. Friday brought a loss of 0.6 percent to 1,013. Enersis slipped again, falling 3.2 percent on concerns about its exposure in Argentina and Brazil.

On Monday, the IPSA gained 0.5 percent to 1,018 in sluggish trade. Tuesday brought a loss to 1,006, as Chilean shares followed the region down. Telecom CTC lost 3.2 percent, while retailer Falabella fell nearly 3 percent.

The IPSA lost 0.2 percent to 1,004 Wednesday in lackluster trade.