LATIN AMERICAN MARKETS: Brazil Stocks Pull Back After Rate-hike Rally

By Carla Mozee

Brazil's key equity index fell Friday, pulling back from a jump in the previous session upon the start of a new interest-rate tightening cycle in Latin America's largest economy.

Brazil's Bovespa fell 0.7% to 67,529.73, led by a 2% decline among the heavily weighted steel group. Shares of Gerdau (GGB) fell 1.6%, MMX Mineracao fell 3.8% and Usiminas declined 3.3%.

Shares of Brazil's Vale (RIO) fell 2.8% after the world's largest iron ore miner said it will pay $2.5 billion in cash for a 51% stake in BSG Resources. The British mining company holds iron-ore concessions in West African country of Guinea

The Bovespa's loss was somewhat capped by gains among retailers, home builders, communications issues and consumer-discretionary shares. Advancers were led by rises of 4.7% each in shares of PDG Realty (PDGRY) and grocer CBD (CBD).

Shares of Lojas Renner rose 3.6% after the department store operator posted a first-quarter profit of 36.9 million reals ($21.2 million), compared with 10.9 million reals in the same quarter last year.

The Bovespa rose 2% in the previous session after Brazil's central bank late Wednesday raised its key interest rate to 9.5% from the historic low of 8.75%. The hike arrived amid concerns that the economy is at risk of overheating and as data show a buildup in inflationary pressures.

Frederick Searby, an equity strategist covering Latin America at Deutsche Bank, recommended in a note Friday that clients stay long in financials, staples and health care stocks, "which fare well" in tightening cycles.

"We also recommend in somewhat contrarian fashion telcos, due to sector consolidation and outlier cheap valuations," he wrote.

The broker said its Brazil focus list includes Natura Cosmeticos , dental benefits provider Odontoprev , card-payment processor Cielo (CIOXY) and stock-exchange operator BM&F Bovespa .

The Bovespa dropped 2.8% for the week, and fell 4% for the month, the first monthly decline since January. It's down 1.5% on a year-to-date basis.

Mexico's IPC lost grip of earlier gains Friday, and fell 0.5% to 32, 687.32. The index fell 1.7% for the month, the first monthly loss since January.

But investors also pushed shares of supermarket-chain operator Grupo Comercial Chedraui higher in the company's trading debut in Mexico City. Its B shares rose 5.9% to 36 pesos ($2.92) after pricing at 34 pesos. Chedraui is the first company to launch an initial public offering in the Mexican market in nearly two years.

Shares of heavyweight America Movil (AMX) also rose, by 1.9%. The wireless giant on Thursday posted first-quarter net earnings of 16.9 billion pesos, up from 16.6 billion pesos from a year-ago. Analysts polled by Dow Jones Newswires had expected a profit of 19.1 billion.

Chile's IPSA rose 0.4% to 3,865. It closed the month with a 2.7% advance.

Argentina's Merval fell 1 point on Friday to 2,428.43, and finished April with a 2.3% gain.