By Carla Mozee, MarketWatch
LOS ANGELES (MarketWatch)—Stocks in Mexico fell Tuesday after a softer-than-expected monthly retail sales report from the United States, Mexico’s key trading partner. Meanwhile, Chilean stocks held to minor gains ahead of an interest-rate decision by the central bank.
Equities in Brazil and Mexico also traded lower following the U.S. Commerce Department’s report that retail sales rose a seasonally adjusted 0.4% in January, below MarketWatch’s forecast for growth of 1%, largely because of weakness in automobile sales.
U.S. auto sales drop in January
U.S. retail sales rose less than expected in January as vehicle purchases plunged, an indication that consumers may remain cautious. (AP Photo/The DeSoto Appeal, Stan Carroll)
While sales were at highest level in four months, investors appeared concerned that the report may point to slower spending by consumers, which accounts for as much as 70% of U.S. economic activity. Read about January U.S. retail sales.
In Sao Paulo, the Ibovespa /zigman2/quotes/210597947/delayed BR:BVSP -0.68% closed down 1% at 65,038.53. Argentina’s Merval lost 1.2% to end at 2,725.17. But stocks on Wall Street largely recovered losses, leaving the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -0.43% up 4 points at 12,878.28 and the S&P 500 Index /zigman2/quotes/210599714/realtime SPX -0.21% down 0.1% at 1,350.50, off session lows.
Mexican assets are particularly sensitive to U.S. economic data as Mexico sends about 80% of its products, including auto parts, to its neighbor.
In Mexico City, shares of industrial conglomerate Alfa /zigman2/quotes/209879644/delayed MX:ALFAA -0.93% slumped 2.2%. Shares of cement and ready-mix concrete supplier Cemex /zigman2/quotes/203703444/composite CX -0.61% fell 2.9% and copper miner Grupo Mexico /zigman2/quotes/207097853/delayed MX:GMEXICOB +0.19% ended 0.9% lower. Market heavyweight America Movil shares /zigman2/quotes/205846431/composite AMX +0.76% fell 0.5%.
Home builder Urbi Desarrollos Urbanos /zigman2/quotes/201086462/delayed MX:URBI -5.22% was the worst performer, dropping 19% after the company forecast negative free cash flow to equity for the fourth quarter and full-year 2011.
The company said delays in expected new funding for subsidies for two government programs hurt free cash flow to equity generation during the fourth quarter. It sees negative free cash flow to equity for the full year of 3 billion pesos ($235 million) to 3.5 billion pesos.
Urbi, in its preliminary 2011 report, said 2011 revenue rose between 9% and 10% to 16.3 billion pesos to 16.5 billion pesos from a year ago.
In Santiago, finance stocks came off stronger levels ahead of an expected rate decision by Banco Central de Chile, due Tuesday evening. Economists surveyed by Dow Jones Newswires widely anticipate the bank to hold the key rate at 5%, partly because domestic demand has remained strong.
Shares of Banco de Chile /zigman2/quotes/205809650/composite BCH +1.72% rose 0.3%, Banco Santander Chile /zigman2/quotes/202859081/composite SAN -1.28% turned lower by 0.1% and CorpBanca pared its rise to less than 0.1%.
J.P. Morgan told clients Tuesday its economists expect monetary policy makers to leave the key rate at 5%, but noted that “markets are pricing in a non-trivial chance” for a rate reduction.
“At this point it’s a close call given the mixed data flow as January inflation was benign while December activity accelerated,” said Latin American research analysts at J.P. Morgan.