* Brazil economic activity data disappoints in December
* Pao de Acucar earnings beat forecasts on cost-cutting
* Brazil Bovespa falls 2 pct, Mexico IPC drops 0.7 pct
By Asher Levine and Danielle Assalve
SAO PAULO, Feb 20 Brazilian stocks fell on
Wednesday to a three month low on weak earnings results and
worse-than-expected economic activity data, while shares in
Mexican billionaire Carlos Slim's flagship firm America Movil
Brazil's benchmark Bovespa stock index slipped for a
sixth straight day, losing 1.98 percent to 56,177.6 points, its
lowest since mid-November. The fall was its biggest one-day drop
in percentage terms since late September.
Latin American markets tracked a sharp drop in stocks on
Wall Street after minutes from the U.S. Federal Reserve's most
recent meeting suggested the central bank may slow or stop
buying bonds sooner than expected.
The Fed's easy monetary policy has supported riskier assets
but further signs that U.S. policymakers could tighten policy
could sap demand for assets such as emerging market stocks.
The Bovespa has shed more than 11 percent from a high in
early January and chart watchers said stocks could face a much
steeper drop if bargain hunters do not jump in soon.
"For now the market is going through a short-term downward
trend, but if it breaks through 55,000 points, the index will
take on a very negative tone for a slightly longer period of
time," said João Marcello Schoenberger, technical analyst with
Ágora Corretora in Rio de Janeiro.
Brazilian economic activity data for December came in weaker
than expected, adding to concerns over lackluster growth in
Latin America's largest economy.
"The numbers didn't help. Economic activity is quite weak
and the worries continue, with inflation a concern," said
Clodoir Vieira, chief economist with Souza Barros in Sao Paulo.
Investors also focused their attention on corporate
earnings, with exchange operator BM&FBovespa SA down
2.81 percent after Brazil's sole financial bourse reported lower
fourth-quarter net income.
Increasing fears over inflation have recently led investors
to step up bets on interest rate hikes this year, which could
put even more downward pressure on local stocks.
"We are seeing some of the country's major pension funds
leaving the equities market, despite rates being at record-low
levels," said Anderson Luz, managing partner with Intrader in
Pension funds and other large institutional investors tend
to place more of their assets in bonds, as opposed to riskier
equities, when interest rates rise.
Luz said that while an upcoming rate hike is not a
certainty, it could set a precedent for more increases ahead,
which could lead to further troubles for the Bovespa.
Among gainers in Brazil, retailer Grupo Pão de Açúcar
rose 1.5 percent after touching an all-time high on
better-than-expected earnings posted on Wednesday.
Mexico's IPC index fell 0.72 percent to 44,451.69,
cutting into a rebound from last week after stocks hit their
lowest level this year.
Mexican stocks mounted successive record highs during 2012
into January this year before stalling out and slumping.
Telecommunications firm America Movil, controlled
by billionaire Carlos Slim, lost 2.28 percent after Slim backed
Dutch telecommunications group KPN's plan to raise 4
billion euros ($5.3 billion) as he battles to turn around a
losing investment in the European firm.
Chile's IPSA index posted its biggest drop in almost
seven months, losing 1.35 percent.
Shares of regional energy group Enersis fell 3.8
percent, contributing most to the index's losses. Traders said
shares suffered from profit-taking after a deadline for an
upcoming capital increase, which had increased demand for the
stock in the previous session.
Latin America's key stock indexes at 1615 GMT:
Stock indexes daily % YTD %
MSCI LatAm 3,833.29 -1.39 0.93
Brazil Bovespa 56,177.60 -1.98 -7.83
Mexico IPC 44,299.56 -0.76 1.36
Chile IPSA 4,542.66 -1.35 5.61
Chile IGPA 22,140.41 -1.12 5.08
Argentina MerVal 3,268.77 0.14 14.52
Colombia IGBC 14,814.17 -0.42 0.67
Peru IGRA 20,818.86 -0.99 0.92
Venezuela IBC 617,509.0 1.03 30.98