By Carla Mozee
Brazil's stocks rose for the first time in three sessions, and
the currency advanced Tuesday following a report that activity in
Latin America's largest economy surged in the first quarter.
Brazil's Bovespa equity index closed up 1.1% to 61,855.52, aided
by gains among agricultural, home building, consumer discretionary
and steel stocks. Overall gainers were led by a 6.1% climb in MMX
Mineracao and a 4.1% rise in sugar and ethanol producer Cosan
(CZZ).
Heavyweights Petrobras (PBR) and Vale (RIO) rose 0.5% and 1.1%,
respectively.
The currency (CUR_USDBRL) strengthened to 1.8599 reals per U.S.
dollar compared with Monday's level at 1.876 reals.
The assets were pushed higher after IBGE, the country's Census
Bureau, said gross domestic product in the first quarter leapt 9%
from the same period a year ago, easily outstripping the consensus
estimate from Dow Jones Newswires for growth of 7.6%.
The 9% rate marked the highest rate of growth since 1995.
Brazil's GDP in 2009 contracted 0.2%.
For the second quarter of this year, there are "already
indications of a slowdown," said Finance Minister Guido Mantega in
a statement. "The annual growth will be high but the rates along
the period are decreasing."
The economy expanded 2.7% from the fourth quarter of 2009.
Growth rates for the fourth quarter and the third quarter of 2009
were also upwardly revised.
The "odds that real GDP growth breaches the 7% level are high,"
wrote Guilherme Loureiro, an economist at Barclays Capital's
emerging-markets research unit, in a report to clients.
On the supply side, the industrial sector in the first quarter
expanded by a robust 14.6% from a year ago. The biggest "surprise"
on the demand side came from investment, which grew 7.4% from the
year-ago period, Loureiro wrote. Investment is now 18% of GDP, up
from 16.3% a year ago.
Loureiro added that the strong economic recovery "should keep
the [Brazilian central bank] in tightening mode."
The first-quarter GDP report arrived a day before Brazilian
monetary policy makers are widely expected to lift the key Selic
interest rate by 75 basis points. The rate currently stands at
9.5%. It was raised in April from a record low 8.75%.
Meanwhile, in Mexico City, shares of Grupo Mexico climbed 4.2%,
its first rise in four sessions, after the copper miner's rating at
HSBC was upgraded to overweight from neutral.
A "second look" for South and North American copper miners is
warranted after a significant fall in equity valuations that was
likely stoked by debt and growth fears, wrote analyst Jordi
Dominguez in a note.
The broker also upgraded Freeport-McMoRan Copper & Gold
(FCX) and Canada's Teck Resources Ltd. (TCK).
Copper miners might benefit from strong U.S. dollar prices
because it lowers costs in a majority of operations, wrote
Dominguez. The miners are also "in a position to generate ample
cash flows" with copper prices around $3 a pound.
Copper prices traded above $3 last week. July copper on Tuesday
rose a penny, or 0.5%, to $2.77 a pound.
The IPC index tracking Mexico's equity market rose 1% to
31,059.83. Chile's IPSA rose 0.4% to 3,876.68, and Argentina's
Merval gained 1.7% to 2,236.84.