Latin America
- As inflationary pressures waned across the region, Latin American central banks continued to reduce their policy interest rates in a sustained effort to stimulate their economies. The month saw cuts in Chile, Colombia and Mexico. By contrast, with no interest rate decisions scheduled for May, the key Brazilian rate remained unchanged at 10.25%.
- Meanwhile, month-on-month industrial production rose by 3.3% in Argentina and 1.1% in Brazil, contrasting with a 5.2% decline in Chile. Industrial output from most Latin American countries nevertheless remains below levels witnessed a year ago. Elsewhere, tensions grew between the Venezuelan authorities and privately owned companies after President Chavez declared that he was nationalising a number of oil service and industrial metals companies.
- Latin American equity markets extended their rally, generating a strong positive performance with the FTSE All-World Latin America Index rising 12.1% versus the FTSE All-World return of 6.7%, in local currency terms. Brazil rose 11.3% in May, boosted by the largest company in the index, Petrobras, a major energy stock which soared on the back of a recovery in the oil price. The industrial metals company SID Nacional similarly benefited from improving sentiment, while strong performance also came from the Sao Paulo stock exchange operator BM&F Bovespa and the Bank, Bradesco.
- Mexico, the region’s second largest market returned 11.8% in May, helped by a recovery in the shares of the telecoms giant America Movil and the cement company, Cemex. The top performing countries over the month were Peru and Argentina, which rose 28.5% and 20.9% respectively.
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