FINANCIAL MARKETS : Latin Stocks Bounce Back; Dow Eases 4.7
Latin American stock markets rebounded sharply Wednesday as President Clinton offered new support for beleaguered Mexico, while the U.S. stock market closed with modest losses.
Latin stocks stole the spotlight, as they have all week. In Mexico City, the shocking selloff that began Monday and ran through Tuesday continued early Wednesday, as the Bolsa index fell as much as 6.7% in morning trading to 1,840--after plummeting a total of 12.5% on Monday and Tuesday.
But Clinton’s announcement of new financial help for Mexico’s economy stirred bargain hunters to action at midday, and the Bolsa soared to close with a gain of 55.54 points, or 2.8%, at 2,027.87.
The turnaround in Mexican shares, fueled by heavy purchases by the Mexican state development bank Nafinsa, quickly spread to other Latin markets that have been battered in recent weeks.
In Brazil, the Bovespa stock index soared 2,291 points, or 7%, to 34,991 on Wednesday after tumbling 33% between mid-December and Tuesday.
In Argentina, the Merval stock index zoomed 4.9%, while Chile’s IPSA index gained 3.8%.
Some analysts cautioned that any sustained turnaround in Latin markets, especially Mexico, could be elusive. The unexpected 40% devaluation of Mexico’s currency since mid-December has shaken many investors’ faith in Mexico.
Lawrence Goodman, Latin American analyst at Salomon Bros., said the Mexican market won’t stage a real rally until the Mexican government announces a plan for repaying investors who own billions of dollars in dollar-indexed tesobono bonds coming due in the near future.
Meanwhile, in New York, Mexico’s troubles clipped some U.S. banking stocks on worries about loan defaults. Citicorp shares, for example, slumped 1 3/8 to 40 3/8 in heavy trading.
But the broader U.S. market appeared to be helped by the Mexican market’s midday recovery. The Dow industrials, off 25 points early on, closed down just 4.71 points at 3,862.03. Losers narrowly outnumbered winners on the NYSE in heavy trading.
The stock market didn’t pay much attention to the Labor Department’s report that consumer price inflation was a reasonable 0.2% in December and 2.7% for all of 1994. But the bond market seemed to get a lift from that news, which followed Tuesday’s report of tame wholesale inflation.
Interest rates slid across the board, with the three-month Treasury bill yield falling to 5.76% from 5.88% on Tuesday, and the 30-year T-bond yield dipping to 7.83% from Tuesday’s 7.86%.
Among Wednesday’s highlights:
* Banking stocks falling on Latin debt worries include J.P. Morgan, down 1 3/8 to 56 3/8; BankAmerica, off 1/2 at 40 7/8, and First Chicago, down 1/2 at 46 1/8.
* U.S.-traded Latin shares rebounding included Telmex, up 2 1/4 to 35 5/8 after sinking as low as 32 1/4; Grupo Televisa, up 3 1/8 at 24 7/8; Coca-Cola Femsa, up 1 7/8 at 22 1/8; Mexico Fund, up 1 1/4 at 19 1/8; Argentine oil giant YPF, up 1 7/8 at 21 3/4; Compania de Telefonos de Chile, up 4 1/8 at 74 3/4, and Brazil Fund, up 3 13/64 at 28 7/8.
* Elsewhere, Apple Computer leaped 3 1/16 to 46 3/4 on renewed takeover rumors.
* On the downside, Federal-Mogul plunged 5 3/8 to 17 1/2 after the auto parts maker warned of disappointing 1994 earnings. Also, Biogen tumbled 6 7/8 to 35 3/8 on news that rival Schering won a patent to manufacture a competing beta-interferon drug to combat multiple sclerosis.
In currency markets, the Canadian dollar, which hit the lowest level in nine years on Tuesday, weakened again Wednesday.
In other stock markets, Hong Kong’s Hang Seng index plunged 148.97 points to 7,392.75, while Tokyo’s Nikkei-225 index added 47.02 points to 19,548.47.
In Frankfurt, the DAX index rose 9.95 points to 2,061.05, while London’s FTSE-100 index fell 11.0 points to 3,049.4.