LATIN AMERICAN MARKETS: Equities Rally With Wall Street; Brazil's GDP Points To Rate Cut

Major Latin American equity markets surged Tuesday, benefiting from a financial-sector driven rally on Wall Street, and from prices that firmed for some commodities during much of the session.

Brazil's market received additional support from increased anticipation of a big interest-rate cut on Wednesday from the current rate of 12.75%, after gross domestic product figures showed the region's largest economy is near recession.

Brazil's Bovespa climbed 5.6% to 38,794.55 for its first win in four sessions, with shares of Petroleo Brasileiro (PBR) up 5.3% after the oil giant told regulators that it discovered traces of oil during a test of an onshore well in the Reconcavo Basin.

The shares retained their advances even after oil prices lost grip of earlier gains and fell 2.9% to $45.71 a barrel on the New York Mercantile Exchange. The losses came after the U.S. government lowered its forecast for oil prices this year.

In Mexico, the IPC rose 3.4% to 17,543.52, with help from copper miner Grupo Mexico as copper prices for May delivery rose 2.7% to $1.6845 a pound, bucking the losing trend in other metals.

Grupo Mexico's shares ended 3.4% higher.

Shares of Cemex (CX) leapt 12%, recouping much of their losses over the past three sessions on concerns about the company's now-abandoned plans to issue bonds in an effort to deal with its heavy debt load.

Banorte shares led advancers on the benchmark, up 16%.

Argentina's Merval rose 5.1% and Chile's IPSA gained 2.8%.

On Wall Street, stocks soared after embattled bank Citigroup Inc. said it turned a profit during the first two months of 2009. Adding to the surge in equities, Federal Reserve Chairman Ben Bernanke said he expects the economy to rebound later this year if the government is able to stabilize the banking system.

The S&P 500 Index jumped 6.4% and the Dow Jones Industrial Composite rose 5.8%.

In Brazil, the census bureau said Tuesday that the economy grew 1.3% in the fourth quarter of 2008 from the year-ago period, below the forecast for growth of 1.64% produced by a Dow Jones Newswires survey of economists.

The "slowdown is there for all to see. Things are not improving," wrote Guilherme da Nóbrega, chief economist at Itaú Securities, in a note to clients. "Demand remains weak, inflation is falling, and the avenue for rate cuts is still widening."

The economy contracted by 3.6% from the third quarter, the steepest sequential decline on record. GDP growth also slowed markedly from 6.2% in the fourth quarter of 2007.

The report leaves the country's 2008 economic expansion at 5.1%, compared with 5.7% in 2007.

After last week's tepid monthly industrial production report, investors and market professionals raised their bets for a rate cut of at least 150 basis points.

The central bank "would hardly go wrong by cutting as much as 200 basis points," said Nóbrega. "That is an option in their hands."

The iShares MSCI Brazil Index Fund (EWZ), an exchange-traded fund, bounced 7.8% higher.

Credit Suisse forecast a rate cut of 200 basis points for Wednesday, and a cut of 150 basis points when the central bank meets in April.

The broker said online retailer B2W Companhia Global do Varejo, department store operator Lojas Americanas and utility Companhia Energetica de Sao Paulo are among the companies whose borrowing costs and earnings would benefit from a lower benchmark interest rate.

B2W shares climbed 7.2% and Lojas Americanas gained 4.5%.

The "probability of recession has increased for Brazil," wrote Alfredo Coutino, senior Latin American economist at Moody's Economy.com. He said he expects economic growth of around 1.5% in 2009 and for the economy to only function "with its domestic engine."

He also expects the central bank to accelerate the speed of monetary relaxation during the first half of 2009, which would help "smooth the fall and shorten the contraction."

Brazilian President Luiz Inacio Lula da Silva reportedly said Tuesday interest rates must decline but that he doesn't expect to see the economy fall into recession.


(END) Dow Jones Newswires

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Does your Company have a problem in recruiting the right person for the right chair? If yes, try this simple experiment.

Put around 100 bricks in some particular order in a closed room with an open window.
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~If they are counting and recounting the number of bricks -PUT THEM IN ACCOUNTS DEPT.

~If they have messed up the whole place with the bricks -PUT THEM IN THE ENGINEERING DEPT.

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PLANNING.

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Last but not least....

~ If they are talking to each other and not a brick has moved -PUT THEM IN TOP MANAGEMENT