Latin American stocks steadied Friday afternoon from earlier surges as investors poured money into risk assets a day after the US Federal Reserve announced a third round of aggressive monetary stimulus. The MSCI Latin American stock index rose 1.74 percent to 3,806.26 and is on track to post a 4.8 percent weekly gain, its best since mid-January.
Shares of the most widely traded commodities firms drove Brazil's benchmark Bovespa stock index to its seventh straight gain. The US Fed launched an aggressive monetary stimulus program on Thursday, saying it will buy $40 billion of mortgage-backed securities per month and likely leave interest rates at current rock-bottom lows until at least mid-2015.
"What the Fed has done is a big boost for risk assets, and I expect that to mean that the Bovespa will push higher next week and through the end of the year," said Katherine Rooney Vera, an analyst with Bulltick Capital Markets in Miami. "It's the Fed flooding the market with liquidity and absolutely pushing investors to search for yields. I think that's a good thing, particularly for Brazil's market."
The announcement also helped consolidate a gaining trend in Brazilian stocks, which are now up over 15 percent in the third quarter. Foreign investors returned to the market as the outlook for Brazil's economy began to improve, following better-than-expected economic data released by Brazil's central bank on Friday.
The bank's IBC-Br economic activity index, a closely-watched index regarded as a proxy for official gross domestic product data, rose by 0.42 percent between June and July, more than 0.1 percent higher than a Reuters survey had forecast. Brazil's Bovespa rose 0.24 percent to 62,105.47, breaking resistance at 60,000 and soaring to its highest level in more than four months. The index is on track to post a more than 7 percent weekly gain, its biggest in over 10 months.
"The market is pulling back a bit and on Monday it will go through a normal profit-taking trend," said Luiz Roberto Monteiro, an analyst with the Renascenca brokerage in Sao Paulo. "Many people are taking advantage of the gains to book profits, which is a process that has already started." Shares of state-controlled oil company Petrobras and mining giant Vale rose 1.75 percent and 1.1 percent, respectively.
Previous stimulus programs have boosted commodities prices, supporting Latin American raw materials producers, as a weaker dollar has made it cheaper for holders of other currencies to buy commodities priced in dollars. Mexico's IPC index edged higher for a fourth straight session, gaining 0.10 percent to 40,693.47. Retailer Wal-Mart de Mexico added 1.92 percent, its best gain since early July.
"Walmex has been severely punished but now the punishment is over," said Gerardo Copca, an analyst at Mexico City's MetAnalisis brokerage, referring to the bribery allegations that rocked the company earlier this year. The big loser was Mexico's media behemoth, Televisa, which dulled gains across the index, losing 2.53 percent. "There's a lot of doubt surrounding what's going on with Iusacell (one of Mexico's smaller cell phone companies, half-owned by Televisa)," said Copca. "The market hasn't liked that relationship." Chile's IPSA index rose for the sixth session in seven b y 0.79 percent, a s retailer Falabella climbed 1. 6 percent.