By Carla Mozee
Latin American equities declined Monday as more forecasts for
economic contraction rolled out and as Wall Street slumped in the
wake of a warning about large losses in the banking sector.
In Mexico, the IPC index fell 0.6% to 20,807.21, resuming trade
after a halt during the session. Trading was halted because of a
technical glitch involving phone lines, according to a Dow Jones
Newswires report.
Decliners included market heavyweight America Movil (AMX).
Shares of the wireless services provider fell 2.8%.
Brazil's Bovespa fell 0.5% to 44,167.26 with shares of steel
maker Gerdau falling 1.9% after the broker cut its rating on
Gerdau's U.S.-listed shares (GGB) to sell.
Stock in oil giant Petrobras (PBR) shed 0.4%, but pared deeper
losses. Crude-oil futures for May delivery fell 2.8% to $51.05 a
barrel on the New York Mercantile Exchange. Prices for copper,
silver and other metals also slumped.
Questions about future demand for natural resources in the U.S.
and worldwide emerged with a flare-up in worries about the health
of the U.S. financial sector after an influential analyst said on
Monday that loan losses in the sector are likely to grow more
severe than they did during the Great Depression.
Mike Mayo, a former analyst at Deutsche Bank and now at Caylon
Securities, initiated coverage on U.S. banks with an underweight
sector rating.
The S&P 500 Index (SPX) fell 0.8% and the Dow Jones
Industrial Average (DJI) fell 41 points, or 0.5%.
The dreary financial-sector forecast came as investors in
Brazilian markets received results from a weekly central bank
survey of economists that showed they now expect gross domestic
product in Brazil to fall 0.19% in 2009. The consensus estimate
last week was for 0% growth. Latin America's largest economy
expanded 5.1% in 2008.
At the same time, Merrill Lynch cut its forecast for Mexican GDP
growth in 2009 and said it foresees a decline of 3.2%
year-over-year as it expects a sharp deterioration in the outlook
for activity in the first quarter.
"This follows from more risks stemming from the US recession
(eg, auto industry woes) but especially from an earlier and more
forceful spill-over from Mexican manufacturing to services," wrote
chief Latin American economist Felipe Illanes.
Economic activity in Chile was shown on Monday to have softened
in February. The government's Imacec index, which tracks 90% of
goods and services that make up gross domestic product, in February
fell 3.9%, in part because of a pullback in mining and industrial
production. Analysts polled by Dow Jones Newswire had expected a
decline of 3.5%.
Chile's IPSA equity index fell 0.2% to 2,545.05.
Steel stocks in Brazil took some of the sharpest losses Monday
after Deutsche Bank lowered its forecasts for benchmark hot rolled
coil, or HRC, prices in the U.S. and Europe for this year and in
2010. It expects an average HRC price of $515 a tonne in 2009,
representing a 46% decline year-over year.
The broker also expects global steel consumption will contract
17% this year, compared with its prior estimate of a 7%
decline.
"Investor sentiment has changed in recent days to broad optimism
that demand has bottomed, and we accept that steel stocks
outperform in the early stages of a recovery," wrote Deutsche Bank
research analysts David Martin and Jorge Beristain.
"However, we aren't yet prepared to accept this as a sustainable
rebound as we haven't observed any meaningful improvement in
'leading' indicators in steel and steel price pressure hasn't
abated."
In addition to cutting Gerdau's rating, Deutsche Bank assigned a
sell rating on shares of Ternium SA (TX), saying that "healthy
balance sheets are critical" and that the companies, along with
ArcelorMittal (MT), "pose the greatest risk in the sector."
Stock in Companhia Vale do Rio Doce (RIO), the world's largest
provider of steel component iron ore, fell 1.8%.
Argentina's Merval fell lost 0.9% to 1,159.79 as shares of steel
tube maker Tenaris (TS) gave up 0.9%.