LATIN AMERICAN MARKETS: CORRECT: Mexican Stocks Drop As Wall Street, Oil Prices Tumble

By Carla Mozee

Latin American equities slid Monday, as stocks on Wall Street tumbled on worries that the U.S. banking system remains in rough shape, and as oil prices posted their steepest one-day drop in more than a month.

In Mexico, the IPC index fell 2.9%, with shares of cement maker Cemex (CX) down 7.4%.

"The market talk is that [Cemex's] earnings will be poor, with some talking about a 65% drop in net income" in the first quarter, said Marc Chandler, senior currency strategist at Brown Brothers Harriman, in a note Monday. "Recall that in March Cemex pulled back from its intention of raising $500 million through a bond offering."

Cemex's report is due April 28.

The fall in Cemex, which acts as a bellwether equity in Mexico, may have been "one potential driver" for a sharp drop in the Mexican peso, said Chandler. The currency fell 2.2% to 13.415 per U.S. dollar.

The only two winners on the IPC on Monday were household products maker Kimberly-Clark de Mexico (KCDMY) and electronics retailer Grupo Elektra, up 6.8% and 1.3%, respectively. Kimberly last week posted quarterly results that were in line with market expectations.

Shares of Mexican market heavyweight and wireless services provider America Movil (AMX) dropped 3.7% and retailer Walmex (WMMVY) fell 1.2%.

Shares of Banco Compartamos fell 1.2% to 34.80 pesos ($2.60) following Citigroup's downgrade of the lender to hold from buy, citing fair valuation and a recent rally in the shares.

But the company is the "best option to tap into Mexico's large unbanked population," said Citi, which still holds a positive, longer-term view of Compartamos and raised its price target on the company to 38 pesos from 35 pesos.

In Sao Paulo, shares of oil giant Petrobras (PBR) dropped 2.4% as crude-oil prices on the New York Mercantile Exchange fell 8.8% to $45.88 a barrel, hurt by a strength in the dollar and excess crude inventories. It was the commodity's worst percentage decline since March 2.

Oil also pulled back after Bank of America's (BAC) better-than-expected earnings were overshadowed by the company's warning that losses from bad loans are poised to worsen.

"A stronger U.S. dollar and renewed concerns regarding an economic recovery once again drove oil prices down," said analysts at Commerzbank.

On Wall Street, the S&P 500 Index (SPX) surrendered 4.3% and the Dow Jones Industrial Average (DJI) fell 3.6%.

Brazil pressured

At the same time, Brazilian analysts continue to expect Latin America's largest economy to shrink this year. The central bank's weekly survey shows that they now expect gross domestic product in 2009 to fall 0.49%, compared with the previous estimate of 0.3%.

In addition to a dimmer view of the Brazilian economy, Companhia Vale do Rio Doce (RIO) shares also fell under pressure after the world's largest iron-ore provider said it is offering temporary prices discounts of 20% on long-term contracts. The prices will be adjusted when discussions about benchmark prices for this year are completed.

Vale's shares lost 2.3%.

The Bovespa equity index ended 2.9% lower, with the session also influenced by the expiration of options.

Argentina's Merval fell 4.9% as shares of steel tube maker Tenaris (TS) dropped 7.2%. Chile's IPSA fell 1.5%.