Latin American Markets: Mexico stocks slip as rate-cut hopes dim

By Carla Mozee, MarketWatch

LOS ANGELES (MarketWatch) ? Mexican shares slipped Monday, pulling back as anticipation for interest-rate cuts dimmed following a bigger-than-expected monthly reading for consumer prices.

Mexico?s IPC /quotes/zigman/1475587 MX:IPC -0.05% ?shed 19 points, or less than 0.1%, to close at 36,785.34, marking the third straight session of declines. The IPC finished last week with a 0.7% loss, and closed 2011 down 3.8%.

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Decliners on Monday included home-building and retail stocks. Stock in home builder Homex /quotes/zigman/351537/quotes/nls/hxm HXM -1.21% ?shed 1.2%, and electronics retailer Elektra /quotes/zigman/308406 MX:ELEKTRA -0.89% ? fell 1%. Market heavyweight and wireless services provider America Movil /quotes/zigman/276628/quotes/nls/amx AMX 0.00% ?shares also declined, by 0.4%.

Wal-Mart de Mexico /quotes/zigman/256436 WMMVY +1.12% ?shares narrowed their loss to less than 0.1% ahead of the release of the retailer?s same-store sales report for December.

Finance stocks were mixed, with lender Compartamos /quotes/zigman/3436323 MX:COMPARC -2.90% ?leading session decliners, down 1.9%, while banking firm Banorte /quotes/zigman/203730 MX:GFNORTEO +2.37% ?traded up 1.7%.

Earlier Monday, a report released by the Inegi statistics agency said consumer prices surged 0.82% in December from November, higher than the 0.71% rate expected on average by analysts polled by Dow Jones Newswires. BNP Paribas noted one-fourth of December inflation stemmed from a 6.85% month-over-month rise in prices for fruits and vegetables. Food prices have been hurt by a drought in northern Mexico.

The inflation index ended 2011 at a rate of 3.82%, near the 4% upper limit of the central bank?s target. Banco de Mexico?s inflation target was 3%.

Mexico?s currency /quotes/zigman/4867991/sampled USDMXN -0.0066% ?fought off earlier losses to end higher against the U.S. dollar on Monday, trading at 13.688 pesos from 13.70 pesos on Friday.

Inflationary pressures stemming from rising agricultural prices are likely to persist for some months, BNP Paribas told clients. ?In sum, inflation is rising but remains ?relatively? contained and within Banxico?s comfort zone. However, its current level and its near-term trajectory keep a rate cut off the table for a while,? wrote BNP economist Nader Nazmi.

The central bank has held the key interest rate at 4.5% since July 2009.

Given the prospects of higher inflation this year, the rate cuts that had been expected by markets ?are practically cancelled,? said Alfredo Couti?o, director of Latin American research as Moody?s Analytics, in a report.

He said among the factors that could keep the central bank from cutting the key rate is an increase in inflationary pressures fueled by the expansion of public and private spending related to the 2012 presidential election.

BNP said it sees lower inflation in the second quarter, and this, along with its U.S. team?s call for a new round of quantitative easing by the Federal Reserve in April, ?would put the rate-cut option back on the table, we believe.?

Elsewhere, Brazil?s Ibovespa equity index /quotes/zigman/1467794 BR:BVSP +0.82% ?rose 0.8% to 59,082.88. Chile?s IPSA /quotes/zigman/1467792 CL:IPSA +0.09% ?reversed course to end 0.1% higher at 4,205.19. Argentina?s Merval /quotes/zigman/1467195 AR:MERV +0.39% ?gained 0.1% to end at 2,780.51.

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Carla Mozee is a reporter for MarketWatch, based in Los Angeles.

Source: http://www.marketwatch.com/news/story.asp?guid=%7BD0823EB0-3AEB-11E1-A661-002128040CF6%7D&siteid=

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