EMERGING MARKETS-Brazil stocks dip as Ukraine offsets Bradesco profit

Thu Apr 24, 2014 2:31pm EDT

RIO DE JANEIRO, April 24 (Reuters) - Brazilian stocks edged
lower on Thursday as geopolitical tension in Ukraine offset a
surge in banking shares, which followed Bradesco's
higher-than-expected first-quarter profit.
    Investors' appetite for risk in emerging markets subsided as
Russia launched army drills near the border of Ukraine after the
killing of up to five pro-Moscow rebels by Ukrainian forces.
 
    Concern about an escalation of the Russia-Ukraine crisis put
a lid on Brazil's benchmark Bovespa index, which dropped
0.2 percent, and the Brazilian real , which traded
around Wednesday's close.
    "The situation in Ukraine continues to worry the market, and
that is having an impact on overseas markets," said Marcos
Trabbold, a currency trader at B&T brokerage in Sao Paulo.
    Still, shares of Banco Bradesco SA, Brazil's
second-largest private-sector bank, climbed 1.8 percent after it
posted an 18 percent increase in first quarter profit from a
year ago, beating analysts' estimates. 
    Shares of rival Itau-Unibanco Holding SA, which
is also expected to post strong quarterly results next week,
gained 1.4 percent, contributing the most to the rise of the
Bovespa index.
    On the other hand, shares of Usiminas initially
rose after the producer of steel products posted a sharply
higher first-quarter profit, but erased gains in the afternoon
as company executives forecast steel prices and sales will
remain little changed in the next few months. 
    Supporting the Brazilian real was a report by newspaper
Valor Economico saying that President Dilma Rousseff plans to
name central bank president Alexandre Tombini as finance
minister in 2015, if she wins re-election. 
    The change, which Valor says could even happen this year if
Brazil's economic outlook deteriorates further, would be well
received by investors who say incumbent Finance Minister Guido
Mantega has lost much of his credibility by resorting to
accounting tricks to meet fiscal targets.
    Rousseff is currently the favorite to win Brazil's
presidential elections in October, according to recent opinion
polls.
    "This would be very positive for both interest rates at the
back end of the curve and for the Brazilian real," Dirk Willer,
emerging market strategist with Citi, wrote in a research note.
    He added that Tombini has been making the case for tighter
fiscal policy in Brazil. "Of course, it will take some time to
figure out if President Dilma would indeed allow such a fiscal
tightening."
    Mexico's stocks and currency fell slightly
after data showed retail sales slid for a third consecutive
month in February, pointing to flagging consumer-driven growth
in Latin America's second-largest economy. 
    The Mexican peso weakened 0.2 percent, also hurt by
expectations that the central bank will leave interest rates on
hold this year, even as U.S. Treasuries yields rise, because
local inflation eased more than expected in early April.
 
    
 
    
    Key Latin American stock indexes and currencies at 1800 GMT:
     Stock indexes                    daily %    YTD %
                           Latest     change     change
 MSCI Emerging Markets   1003.54      -0.02      0.11
                                                 
 MSCI LatAm              3246.84      0.39       1.04
                                                 
 Brazil Bovespa          51447.89     -0.24      -0.12
                                                 
 Mexico IPC              40273.28     -0.06      -5.74
                                                 
 Chile IPSA              3861.51      -0.26      4.39
                                                 
 Chile IGPA              18996.77     -0.2       4.22
                                                 
 Argentina MerVal        6814.8       1.64       26.41
                                                 
 Colombia IGBC           13350.25     -1.45      2.13
                                                 
 Peru IGRA               15006.39     0.38       -4.74
                                                 
 Venezuela IBC           2393.34      3.3        -12.54
                                                 
                                                 
 Currencies                           daily %    YTD %
                                      change     change
                         Latest                  
 Brazil real             2.2236       0.07       5.99
                                                 
 Mexico peso             13.083       -0.18      -0.41
                                                 
 Chile peso              559.7        0.54       -6.00
                                                 
 Colombia peso           1936.5       -0.03      -0.23
                                                 
 Peru sol                2.791        -0.21      0.07
                                                 
 Argentina peso          8.0000       0.03       -18.84
 (interbank)                                     
                                                 
 Argentina peso          10.67        -1.22      -6.28
 (parallel)                                      
                                                 
 
 (Reporting by Walter Brandimarte, Priscila Jordao and Bruno
Federowski; Editing by Nick Zieminski)
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