By Carla Mozee
Four sessions of consecutive advances by Latin American equities
came to an end Thursday as investors sifted through another round
of poor economic data from the U.S. and took gains off the
table.
Brazil's Bovespa fell 1.5% to 39,638.42, a day after a 3.9%
surge. Mexico's IPC fell 3% to 19,537.05.
On Wall Street, the Dow Jones Industrial Average (DJI) dropped
2.7% and the S&P 500 Index (SPX) fell 3.3%.
Regional stocks were hammered alongside Wall Street after layoff
announcements continued to pile up. Coffee retailer Starbucks Corp.
(SBUX) and Eastman Kodak Corp. (EK) were among the companies that
said it will cut thousands of jobs in a bid to reduce costs to help
offset the impact of the economic recession.
Separately, the Labor Department said continuing jobless claims
rose by 159,000 last week to a seasonally adjusted 4.78 million,
the most since the government began keeping track in 1967. Also,
new claims for state unemployment benefits rose by 3,000 last week
to 588,000.
The numbers come a day before Friday's much-anticipated December
jobs report. Economists polled by MarketWatch expect a loss of
524,000 jobs.
Figures for December sales of new homes were also grim, with the
Commerce Department estimating sales fell 14.7% to a record low of
331,000. Orders for durable goods also fell, by 2.6%, the fifth
consecutive month of declines.
"The chilly economic climate and dicey credit conditions have
sunk demand for business equipment and big-ticket consumer goods,"
said Sal Guatieri, a senior economist at BMO Capital Markets, in a
note Thursday.
Mexico's central bank this week forecast an economic contraction
for 2009 as demand from the U.S. weakens. Mexico exports more than
80% of its products to its northerly neighbor.
In trading, shares of consumer durable companies, retailers and
manufacturers were all dragged lower. Home builders led decliners,
with shares of Urbi down 9.6% and Homex (HXM) down 7.4%.
Shares of Wal-Mart de Mexico (WMMVY) slumped 2.9% and industrial
conglomerate Alfa lost 8%.
Stock in Cemex (CX) declined 6.3% ahead of an expected tumble in
the cement maker's fourth-quarter results. On Wednesday, its shares
climbed 5.5% after the company said it completed debt
renegotiations with its lenders.
Utilities and home builder Gafisa (GFA) were among the only
advancers in Sao Paulo. Shares of electricity provider Cemig (CIG)
rose 0.7% and Eletrobras edged up 0.2%. Gafisa shares rose
1.8%.
Steel stocks were under pressure after UBS Pactual cut its
earnings estimate for Latin American steelmakers, citing its
expectation for domestic prices declines in Brazil and downward
volume revisions for 2009 and 2010.
"We believe steel stocks have hit bottom after a substantial
de-rating from peak valuation levels by mid-2008," said UBS Pactual
in a research note. "Looking forward, we do not see fundamentals
supporting a strong re-rating of the sector."
The broker also said it continues to like buy-rated Gerdau (GGB)
"due to its more attractive growth potential and exposure to
infrastructure."
Argentina's Merval fell 1.3% to 1,086.06.
Late Wednesday, the government reached a deal with local banks
that renegotiates the terms of more than 15 billion Argentinean
pesos ($4.3 billon) worth of debt. President Cristina Fernandez de
Kirchner reportedly called the 97% acceptance rate of its debt-swap
plan an "unprecedented success."
The government had offered holders of 60% of 15.1 billion pesos
of domestic guaranteed loans to swap into five-year, tradable
bonds. The notes will pay a 15.4% fixed-rate during the first
year.
The move will likely generate debt-servicing savings of up to
$1.5 billion in payments in 2009, said Eurasia Group on
Thursday.
The risk-consultancy group wrote Thursday that while the
debt-swap has "clearly improved' Argentina's financing picture, "it
does little to address what promises to be one of the main
challenges facing the government in 2009: the need to obtain more
than $6 billion dollars to cover dollars denominated debt
obligations."
Chile's IPSA slipped 0.3% to 2,562.98, putting an end to its
five-day run of gains.
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