EMERGING MARKETS-Brazilian stocks still irked by "fiscal cliff"

Wed Dec 5, 2012 4:49am IST

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 * Fiscal cliff continues to vex investors
 * Brazil Bovespa loses 1.1 pct, Mexico IPC flat
 * Brazil electric utilities sector still ruffled
 By Roberta Vilas Boas and Gabriel Stargardter
 SAO PAULO/MEXICO CITY, Dec 4 (Reuters) - After trading flat
for most of the day, Brazilian stocks fell more than one percent
on Tuesday as fears surrounding the U.S. "fiscal cliff"
continued to worry investors in the region's largest economy. 
 Mexico's IPC index remained little changed, while
Chile's bourse saw it's biggest drop in a week.
 Brazil's benchmark Bovespa index, which relies
heavily on commodities producers, fell 1.1 percent to 57,563.23,
as Monday's weak U.S. manufacturing data and sluggish budget
talks stoked concerns about the global economy. 
Investors worry the United States could slip into recession
if $600 billion in tax hikes and spending cuts start taking
effect in January. The White House and Congress have failed to
agree on a long-term deficit reduction plan. 
 In an interview with Bloomberg Television, President Barack
Obama rejected a Republican proposal to resolve the crisis as
"still out of balance."  
 "The Bovespa was moving in the opposite direction to
external markets at the start of the day," said Luiz Gustavo
Pereira, a strategist at the Futura brokerage in Sao Paulo.
"Sales fell off after Barack Obama's fiscal cliff declarations."
 The Bovespa saw an early rally in the homebuilders sector
with shares in PDG Realty SA, Gafisa SA 
and MRV Engenharia SA all rising after Finance
Minister Guido Mantega announced a new tax break on Tuesday, in
a move aimed at spurring a sluggish economic recovery.
 
 But the rally was short-lived. PDG Realty SA ended the day
down 1.9 percent. Gafisa SA lost 3.61 percent, while MRV
Engenharia SA fell 1.02 percent. 
 The big winner was MMX Mineracao, the mining
company owned by Brazilian billionaire Eike Batista, which rose
6.18 percent after the company's directors approved a 1.4
billion reais ($662 million) share issuance to strengthen the
company's capital structure and increase iron ore output.
 
 "MMX shareholders should eventually benefit from a more
balanced capital structure," Barclays analysts said in a note,
although they warned the transaction would "be highly dilutive."
 Brazil's goal of cutting electricity rates by a fifth
suffered a setback as several utilities rejected President Dilma
Rousseff's offer to renew expiring hydro concessions early in
exchange for power rate cuts.
 The refusals were led by Cia Energetica de Minas Gerais
 and Cia Energetica de Sao Paulo,
public-private utilities controlled by the Brazilian state
governments of Minas Gerais and Sao Paulo.
 Shares in Cia Energetica de Minas Gerais fell by 0.53
percent, while Cia Energetica de Sao Paulo lost 8.69 percent.
 Federal government-controlled Eletrobras, Latin
America's largest utility, accepted the renewals Monday and saw
its share price fall 1.87 percent on Tuesday. Company shares are
trading at some of their lowest levels in more than a decade.   
 Mexico's IPC index was little changed at 42,337.82. Banking
group Banorte rose 2.9 percent, driving gains,
while telecommunications giant America Movil lost 0.79
percent. 
 Chile's IPSA index dropped 0.35 percent as retailer
Falabella slipped 1.4 percent, and fertilizer, lithium
and iodine producer Soquimich lost 1.07 percent. 
 Latin America's key stock indexes at 2128 GMT:
 
 Stock indexes                                      % change
                            Latest          
                                                         
 MSCI LatAm                       3,575.72             -0.66
                                            
 Brazil Bovespa                  57,563.23              -1.1
                                            
 Mexico IPC                      42,337.82              0.03
                                            
 Chile IPSA                       4,144.06             -0.35
                                            
 Chile IGPA                      20,341.77             -0.21
                                            
 Argentina MerVal                 2,458.95              1.62
                                            
 Colombia IGBC                   14,303.70              0.25
                                            
 Peru IGRA                       20,260.81             -0.15
                                            
 Venezuela IBC                  409,852.72              0.52
                                            
 

 (Reporting by Roberta Vilas Boas, Gabriel Stargardter; writing
by Gabriel Stargardter)
 
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