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America Movil led Mexican stocks up; Brazil eyes rate cut
By Carla Mozee, MarketWatch
Last Update: 2:00 PM ET Apr 29, 2009
LOS ANGELES (MarketWatch) - Mexican stocks climbed Wednesday, fueled by gains in America Movil SAB after the wireless services company's quarterly results exceeded expectations, and Brazilian stocks rose ahead of decision that could take the country's key interest rate to its lowest level on record.
Mexico's IPC rose 2.8% to 22,259.89, with shares of America Movil up 8.6% and moving toward their highest close since Jan. 5.
Brazil's Bovespa rose 2.3% to 46,879.14, with most shares of interest-rate sensitive banks higher. Privately run Itau Unibanco Multiplo ITU up 5.3%, Bradesco BBD up 4.3% and federally run Banco do Brasil rising 3.5%.
Stock in market heavyweight Petrobras PBR gained 2.9% as crude-oil futures rose for the first time in three days, up 1.7% to $50.77 a barrel. Prices rose as U.S. government data showed an unexpected drop in U.S. gasoline inventories. See full story.
As well, the company late Tuesday told Brazilian oil regulators that traces of oil were found at a well in the Espirito Santo Basin.
In Chile, the IPSA index rose 1.5%, with shares of steel maker Cap higher by 2.6%. Argentina's Merval rose 2.1%.
The regional gains came ahead of the conclusion of the U.S. Federal Reserve two-day meeting. The central bank's statement about the economy is due Wednesday afternoon.
While the Fed may point to signs of a nascent economic recovery, it's unlikely to seek a rollback in government stimulus efforts, say analysts. See Fed preview.
The Commerce Department on Wednesday reported that U.S. gross domestic product shrank at a 6.1% annualized rate in the first quarter. Combined with the 6.3% decline in the fourth quarter of 2008, the two-quarter contraction was the worst since 1947. See Economic Report.
In Brazil, rate policymakers are widely expected to cut the key Selic rate by at least 100 basis points as the country continues efforts to fend off the effects of the worldwide financial and credit crisis.
A cut of that size would bring the rate to 10.25%, below Selic establishment rate of 11.25% in 1996.
But the central bank may issue a "more balanced statement" that will likely signal that "the pace of future rate cuts will be more data dependent and potentially warning that an end to the rate cutting cycle could be nearing," wrote emerging markets analysts at RBC Capital Markets in an note Wednesday.
In Mexico City, America Movil AMX posted first-quarter net earnings rose 19% to 16.38 billion pesos on a 15% rise in revenue to $93.83 billion pesos. Earnings before interest, taxes, depreciation and amortization increased to 38.32 billion pesos, up 13% from the year-ago period.
Analysts were looking for earnings of 14.13 billion pesos on revenue of 92.63 billion pesos.
But the company also said it doesn't expect to reach its target of signing up 19 million new subscribers this year,
"With the challenging macro situation, they believe that number is going to be off by 10% to 15%," said Ronald Gruia, principal telecom analyst at Frost & Sullivan. "They had done these numbers in October of last year, and market conditions have changed since," he said. "But average revenue per user should show some resilience because minutes-per-use should increase and more data services are going to be used."
Meanwhile, concerns across Latin America about the outbreak of swine-flu are still present among investors as the first report of a swine-flu death in the U.S. arrived on Wednesday. But overall, "market fears are easing," said Danske Research in a note.
"The situation has been relatively stable over the past 24 hours and [the World Health Organization] has not scaled up its rhetoric."
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