By Carla Mozee
Latin American stocks tumbled Monday, slammed as part of a
worldwide slide in equities as investors braced for the possibility
that U.S. banks will need more capital support and that automakers
General Motors Corp. and Chrysler LLC are moving closer to
bankruptcy.
Investors in Brazil were also grappling with a sharp cut by the
central bank of its 2009 growth economic growth forecast.
Brazil's Bovespa fell 3.1%, with shares of market heavyweight
and oil giant Petroleo Brasileiro (PBR) down 3.6% as crude-oil
prices dropped more than 5% to below $50 a barrel on worries about
the future of the U.S. auto industry.
Investors were concerned about lower demand for oil as it
appeared unlikely that leaders from the world's largest
industrialized and developing economies will agree to another round
of global economic stimulus. The G20 is set to meet in London on
Thursday.
Mexico's IPC fell 3.3%, with only one of the 32 companies listed
on the benchmark trading higher.
Tenaris (TS), which makes steel tubes used by the oil industry,
saw its shares fall 5.5%, helping to pull Argentina's Merval index
down 4.3%. Buenos Aires-listed shares of Petrobras slumped 2.7% and
stock in Petrobras Energia (PZE) fell 4.9%.
In Santiago, the IPSA fell 2%.
Sell-offs in Asian and European markets set the grim tone for
Wall Street, where the S&P 500 Index (SPX) and the Dow Jones
Industrial Average (DJI) were each off 3.6%.
"The Obama Administration wants an overhaul of the recovery
plans at GM (GM) and Chrysler - or their best chance might be a
bankruptcy," said analysts at Saxo Bank in a note Monday.
"It more and more looks like one or both of the companies will
be shut down," as GM Chief Executive Rick Wagoner was "shown the
door" and Chrysler was told it had 30 days to complete a
partnership with Fiat before it could receive more federal funding,
said Saxo.
On Monday afternoon, privately held Chrysler said it reached a
framework for a global alliance with Italy's Fiat (FIATY).
Wall Street and Latin American markets were also rocked by a
slide in financial stocks after U.S. Treasury Secretary Timothy
Geithner said in interviews during the weekend that the banking
industry may need more capital support and warned of continuing
losses. The Financial Select SPDR Fund (XLF), a gauge of large-cap
financial stocks, fell more than 7%.
Brazil lower growth view; Banorte shares rated 'sell'
The global financial crisis is continuing to wear on conditions
in Brazil, Latin America's biggest economy, prompting the central
bank on Monday to cut its forecast for gross domestic product. It
now expects growth of 1.2% in 2009, down from its previous outlook
for growth of 3.2%. The bank also cut its 2010 inflation forecast
to 4% from 4.2%.
In 2008, economic activity registered expansion of 5.1%.
It also lowered its 2009 forecast for inflation, expecting it to
slow to 4%. It previously expected inflation of 4.7%. The
government's target for inflation is 4.5%, with the upper end of
its tolerance band at 6.5%.
The central bank's outlook was based on its expectation for an
annual Selic rate of 11.25% and for the currency to be exchanged at
2.35 reals per U.S. dollar.
"As the output gap continues to widen on a weakening demand, and
as the inflation outlook confirms a lack of worries, one can't help
seeing a wide avenue for further interest-rate easing," wrote
Guilherme da Nóbrega, chief economist at Itau Securities.
"We project another cut of at least 100 [basis points] for April
29, and Selic rate at 8.75% by year end."
Most banking stocks were down, with Bradesco (BBD), Itau (ITU)
and Unibanco (UBB) each trading off more than 3.5%.
Meanwhile in Mexico, the worst performer of the session was
Grupo Financiero Banorte , with its shares down 13% after Citigroup
downgraded the banking concern to sell from buy.
Banorte's shares have risen about 15% in less than two months,
and the broker said their outperformance of the IPC index is
"unjustified" considering the deterioration of the company's micro
and Mexico's macro fundamentals.
In addition to continued weakness in exports, the broker's
economists "point to surprising negative indicators of domestic
activity, something that certainly does not bode well for a
financial institution, particularly with respect to the outlook for
loan growth and, more importantly, asset quality," wrote analyst
Daniel Abut in a note to clients.
Also, shares of cement maker Cemex (CX), which has been dealing
with debt-refinancing efforts, fell 9.2%.
Only shares of steel company Industrias CH were higher, by
0.1%.