LatAm bourses fall on G7, Brazil elections apathy
Reuters, Monday, October 05, 1998 at 12:06
By Shasta Darlington
SAO PAULO, Oct 5 (Reuters) - Latin American markets slumped
in midday trade Monday as the apparent first-round victory of
Brazilian President Fernando Henrique Cardoso at Sunday's
elections failed to animate markets worried about fallout from
the global financial crisis, traders said.
A weekend meeting of the Group of Seven leading economic
powers offered few concrete ideas for relieving the crisis,
fueling concern over the fate of Latin America.
"Nothing substantial came out of the G7 meeting," said
Arnie Owen, managing director of capital markets at Cruttenden
Roth. "Anything that sounded like a constructive idea would
have helped, but there was nothing."
As a result, the Dow Jones Industrial Average slumped 1.67
percent in early trade, spurring a sell-off in Latin America
despite Cardoso's apparent victory in Brazil, which is expected
to be the first step toward addressing financial problems
there.
"A Cardoso victory was already widely discounted," said
Richard Casey, emerging market strategist at Donaldson Lufkin &
Jenrette. "There's still a global flight to quality out of any
risky investments."
With about half the votes counted, Cardoso was seen reaping
50.62 percent of the vote, while runner-up left-wing Luiz
Inacio Lula da Silva had only 34.65 percent of the vote.
Still, Cardoso had only a fraction of the margin he needs
to avoid a run-off with Lula. He must receive at least one vote
more than all of his challengers combined to secure a
first-round victory.
"The narrow margin of his victory might actually cause some
nervousness about his ability to get some of the fiscal
measures through Congress," Casey said, referring to the
budget-slashing steps that Cardoso was seen taking shortly
after elections.
As Latin America's biggest economy, Brazil's stability is
key to shielding the region from a economic and financial
turmoil.
Brazil's bloated fiscal deficit of more than 7 percent of
gross domestic product is considered the biggest obstacle to
investor confidence facing the new administration.
In Brazil, the key Bovespa (INDEX:$BVSP.X) blue chip index was down
5.33 percent at 6,068 points in midday trade.
"Most investors are anxious about what the double packages
-- internal fiscal measures and an external aid package -- will
look like following the polls," a senior trader at Deutsche
Bank said.
In Argentina, the MerVal <.MERV> index of most traded
shares slipped 2.89 percent to 363.27 points in early trade.
"Cardoso's re-election was already factored in, Asia is down
and Europe is mixed," a local trader summed up.
The lack of concrete action from the world's leading
economic powers following their weekend meeting in Washington
was also put a drag on the bourse.
"Whatever Brazil or the G7 announce is going to have to be
much bigger than what the market is already expecting," fund
manager Florencia Greco at BankBoston said.
In Chile, the benchmark Selective <.IPSA> index fell as
much 1.08 percent to 64.88 points in midday trade, tracking the
decline on Wall Street. The G7 group's failure to reach any
proposal's contributed to the fall, traders said.
In Mexico, the key Bolsa <.MXX> tumbled 2.94 percent to
3,424 points in midday trade Monday.
Mexico "is following the trend on the world's principal
bourses and it's obviously dragged down by the Dow," a trader
at a Bolsa said. "There was not-very-good news from the meeting
of the G7 and in general things look negative," he added.
In Venezuela, the benchmark IBC <.IBC> index fell 3.66
percent to 3,542.92 points even as international reserves edged
above $13 billion.
shasta.darlington@reuters.com))
Copyright 1998, Reuters News Service |
