EMERGING MARKETS-Brazil stocks slump, Mexico posts gain

Tue Apr 2, 2013 6:46pm EDT

Related Topics

* Weak Brazil industry data sends Bovespa to key level
    * Mexico's IPC breaks out of recent downtrend
    * Brazil Bovespa falls 1.81 pct, Mexico IPC up 0.41 pct

    By Michael O'Boyle
    MEXICO CITY, April 2 (Reuters) - Brazil stocks fell by their
most in five weeks on Tuesday after data showed the country's
industrial output shrank more than expected in February, sending
the Bovespa index down to a key support level.
    Mexican stocks, meanwhile, continued a rebound from a recent
low and appeared to have broken out of a downtrend.
    Brazil's benchmark Bovespa stock index fell for the
second straight session, losing 1.81 percent to end at 54,889.10
points. The drop marked the second break below the 55,000-level
in just over a week and a further slide may point to another
steep drop.
    Data showed Brazilian industrial production fell a
seasonally adjusted 2.5 percent in February from January,
casting further doubts on the economy's fragile recovery from
last year's sharp slowdown. 
    Chart watchers said if the Bovespa breaks support around
54,600, it could point to a further drop of about 5 percent to
last July's lows.
    "There is no sign that Brazil has found a solid floor," said
Fanuel Fuentes, an analyst at brokerage Monex in Mexico City.
"It looks like it is going to keep going down."
    Brazil's Bovespa has posted three straight monthly declines
and is down nearly 10 percent so far this year, with investors
citing increased policy risk due to heavy government
intervention in the private sector last year.
    The central bank slashed interest rates to a record low in
2012 to support the economy. However, with growth still tepid
and inflation now quickening, the market is eyeing the chance
for higher borrowing costs later this year. Tuesday's weak
industrial production data dampened bets on a hike.
    The interest rate outlook contributed to losses in banking
shares, with Ita├║ Unibanco Holding SA, Brazil's
largest non-government bank, falling 1.41 percent.
    Banks benefit under a higher interest rate scenario, in
which they would gain more from holdings of interest-rate-linked
government debt and face decreasing government pressure to
narrow lending spreads.
    Meanwhile, major commodity producers fell. Shares of state
oil firm Petrobras shed 1.88 percent while iron miner
Vale shed 1.76 percent.
    Concerns that a slowing economy in China will soften demand
for Latin America's raw materials has been weighing heavily on
Brazil and Peru. Peru's main stock index slumped more
than 1 percent to an eight-month low on Tuesday on a drop in
mining companies' shares.
    Mexico's IPC index rose for the seventh session in
eight, adding 0.41 percent to close at 44,113.50 points. Chart
analysts said the strong rebound pointed to further gains ahead.
    The IPC has now recovered more than half of a 9-percent
slump since notching a record high in late January.
    Mexican stocks have been supported by hopes that the new
government will be able to push long-stalled economic reforms
through a divided Congress.
    "Mexico is on everyone's lips and people are buying the idea
that there will be successful reforms," said Manuel Lasa, head
of stock trading at brokerage Interacciones.
    Bottling group Femsa climbed for the fourth
straight day, rising 3.48 percent to just shy of a record high.
    Chile's main stock index fell to its lowest since
early January on a 2.35 percent drop in retailer Cencosud
 after UBS cut the stock to "sell." 

    Latin America's key stock indexes at 2200 GMT:
                               Latest      Daily   YTD
                                           pct     pct
                                           change  change
 MSCI Latin America index        3,767.81   -0.56   -0.79
 Brazil Bovespa                 54,889.10   -1.81   -9.95
 Mexico IPC                     44,113.50    0.41    0.93
 Chile IPSA                      4,396.20   -0.44    2.20
 Chile IGPA                     21,544.27   -0.38    2.25
 Argentina MerVal                3,380.78   -1.06   18.45
 Colombia IGBC                  14,023.64   -0.14   -4.70
 Peru IGRA                      19,702.15   -1.08   -4.49
 Venezuela IBC                 626,820.38   -0.36   32.96
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