By Carla Mozee
Brazilian stocks paced advances in Latin American equity markets
Thursday, as investors embraced risk after developments out of
China and Europe somewhat eased worries about worldwide economic
recovery.
The Brazilian market was also boosted by a rise in shares of
Petroleo Brasileiro SA (PBR) after lawmakers, in long-awaited
action, cleared the way for the government to grant oil-exploration
rights to Petrobras in exchange for new shares in the company.
Petrobras' preferred shares finished up 1.2%
The Bovespa closed 2.6% higher at 63,048.80, in a broad-based
rally that left the index with its best percentage gain in three
weeks.
Gains were supported in part by news that the exports from China
climbed nearly 49% in May, while imports advanced more than 48%. A
wider trade surplus in May also suggested the debt troubles
plaguing Europe haven't hurt demand for Chinese products. Brazilian
markets track economic developments from China because China last
year became Brazil's largest trading partner.
Elsewhere in Latin America, Chile's IPSA finished at a record
high for the second consecutive session. The index rose 1% to
3,944.33. Mexico's IPC advanced 2.2% to 31,910.22 and Argentina's
Merval climbed 1.8% to 2,290.46.
On Wall Street, stocks had their strongest performance since
late May after a German court declined to immediately block the
country's contribution aimed at helping to prevent defaults in the
euro zone.
The S&P 500 Index (SPX) surged 3% and the Dow Jones
Industrial Average (DJI) soared 273 points to 10,172.
As well, "what did seem to have a major impact and lift the
spirits of traders were strong debt auctions in both Italy and
Spain, two countries who have been considered at-risk members of
the European Monetary Union," wrote Dan Cook, senior market analyst
at IG Markets, in a note.
"This helped ease some of the tension gripping the markets
lately, and traders took this as a sign that the time was right to
buy risk."
The battered euro was able to move above the $1.21 level for the
first time in nearly a week after European Central Bank President
Jean-Claude Trichet said the central bank would maintain its
liquidity measures. The dollar index (DXY) fell to 87.06 from 87.91
on Wednesday.
The fall in the dollar paved the way for prices rises in most
dollar-denominated currencies, which benefited the commodity-stocks
heavy Brazilian market. Steel stocks strengthened more than 4%,
with shares of iron-ore provider Vale (RIO) up 0.3% and steel
producer Gerdau (GGB) up 4.3%.
Pulp and paper producer Fibria Celulose (FBR) gained 4.8% and
packaging provider Klabin (KLBAY) shares rose 5.7%.
Brazil's currency rose 1.808 reals per dollar from 1.859 reals
on Wednesday following a decision late Wednesday by Brazil's
central bank to raise the country's key interest rate to 10.25%
from 9.5%. The decision met widely held expectations.
Brazilian Finance Minister Guido Mantega in a teleconference
Thursday reiterated the government's view that gross domestic
product will expand by 6% and 6.5% this year. Earlier this week, a
government report showed that first-quarter economic activity
jumped by a more-than-anticipated 9%.
Earlier Wednesday, the country's Census Bureau reported a 0.43%
rise in May consumer prices from April, below the Dow Jones
Newswires estimate for a rise of 0.46%. Annual inflation now stands
at 5.22%, above the central bank's target of 4.5%.