SAO PAULO: Brazilian stocks rose on Thursday after a government council announced a massive sale of state assets, fueling bets that the government will manage to rein in the growth of public debt and cut a widening budget gap. Brazil intends to sell stakes in some of the country’s busiest airports as well as oil exploration, highway and power dam licensing rights as President Michel Temer seeks to reduce state involvement in the economy.
Brazil’s benchmark Bovespa stock index rose about 1 percent to a new six-year high, with shares of Eletrobras, as the power utility is known, among the biggest gainers. Also helping fuel optimism was a decision by the lower house of Congress to approve the main text of a bill creating a new market-based lending benchmark for state development bank BNDES that would greatly reduce discretionary subsidies. “Coupled with well-behaved inflation, this sets the stage for the central bank to cut interest rates even more,” analysts at the Magliano brokerage wrote in a client note.
The Mexican peso traded nearly flat, down about .2 percent, after Mexico and Canada dismissed U.S. President Donald Trump’s threats to scrap NAFTA, which had wreaked havoc in local markets the day before, as a negotiating tactic. Yields paid on Mexican interest-rate futures rose after minutes from the central bank’s last rate-setting meeting showed policymakers remained cautious with rising inflation, suggesting rate cuts may be farther off than expected. “The discussion among directors was biased toward the need to remain vigilant and ready to protect the integrity of the inflation targeting framework, rather than laying out the case for near-term rate cuts,” Goldman Sachs’ economists wrote in a report. Mexican inflation was higher than expected in the first half of August, keeping pressure on the central bank to maintain high borrowing costs.
