By Carla Mozee
Major Latin American markets dropped Thursday, with Brazilian
stocks unable to gain traction after a larger-than-expected cut in
the country's key interest rate and Mexican stocks absorbing
another round of poor economic and corporate-earnings data from the
U.S.
Brazil's Bovespa fell 1.7% to 37,894.33, a day after Banco
Central do Brasil dropped its benchmark interest rate, the Selic,
by 1% to 12.75%. Analysts had widely expected a rate cut of
three-quarters of a point.
Mexico's IPC lost 1% to 19,306.73, slicing into its 1.5% gain on
Wednesday.
On Wall Street, the Dow Jones Industrial Average (DJI) slumped
1.3%, the S&P 500 (SPX) fell 1.5% and the tech-heavy Nasdaq
Composite (RIXF) dropped 2.8%.
U.S. stocks took a series of hits. The Commerce Department said
housing starts in December skidded to another record low and the
Labor Department reported that last week another 589,000 jobs were
lost.
Microsoft Corp. (MSFT) followed up with its notice that it would
layoff thousands of workers - for the first time ever -- as it
struggles with the impact of the recession. It also posted
disappointing quarterly results.
The lack of "guidance on overall visibility for 2009" by many
companies as they issue their past quarter's results, said Bruce
Zaro, chief technical analyst at Delta Global Advisors, "is making
it difficult for analysts to put numbers on what stocks should be
selling for based on [future] earnings," and that's creating more
uncertainty on Wall Street.
Still, markets outside of the U.S. are "looking to the U.S. for
guidance, and when there's no leadership...they sell off and
emerging markets are going to follow through with that in a more
exaggerated fashion," said Zaro.
Since Jan. 13, the first full trading day after Alcoa Inc.
unofficially kicked off the U.S. corporate earnings season,
Mexico's benchmark index has declined 8.3%. The Bovespa has lost
4.2% and Argentina's Merval has fallen 6.5%. Chile's IPSA, however,
has gained 1%.
In Sao Paulo, banking stocks closed lower. Banco do Brasil fell
1.5%, Unibanco (UBB) lost 2.6% and Itau (ITU) shed 2.8%. Brazil's
central bank late Wednesday, exceeded rate-cut expectations as it
weighed data showing that the global financial crisis is severely
hurting its economic growth prospects.
Brazil's government, in its latest efforts to cushion the impact
from lower domestic and external demand and clogged credit markets,
launched a credit line of 100 billion reals ($43.17 billion) for
companies in need of investment funds, particularly in the natural
resources and infrastructure sectors. The credit line will be
placed with the Brazilian National Development Bank, or BNDES.
Shares of iron-ore mining heavyweight Companhia Vale do Rio Doce
(RIO) slipped 0.5% but closed off session lows after the company's
chief executive said that demand for its main product should
increase in the second half of the year, according to an Estado
newswire report.
In Mexico City, shares of cement maker Cemex (CX) fell 2.5%
after its credit rating was cut to junk status by Standard &
Poor's. The agency said weakening conditions for economic growth in
the U.S., Mexico and Spain will hurt its cash flow and ability to
meet debt servicing costs.
Cemex's debt obligations climbed with its $14 billion
acquisition of Australia's Rinker Group in 2007.
Shares of Grupo Televisa (TV), however, led advancers with a
rise of 7.4% following a settlement of a three-year legal dispute
between the broadcaster and Univision over royalties. Financial
terms weren't disclosed, but Televisa will receive an increase in
payments from a program licensing agreement through 2017.
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