Mexico, Brazil Edge Up In Volatile Sessions

Brazilian and Mexican stock markets gained ground in volatile sessions Monday, as investors weighed prospects of a slower economic recovery along with signs of a rebound in the U.S. housing market.

Brazil’s benchmark Bovespa index rose 0.2% to 54,548.99 and Mexico’s IPC rose 0.6% to 26,815.30, wiping away the red ink seen in earlier trading action.

Among market heavyweights, Brazilian oil giant Petrobras (PBR) shares fell 0.2% and Mexican wireless services provider America Movil (AMX) rose 0.2%. Shares of Mexican banking firm Banorte slipped, by 0.2%.

UBS Pactual downgraded its rating on Banorte to neutral as it sees current valuations as “stretchy, particularly with headwinds ahead,” including slowing loan growth on a macro basis and deteriorating asset quality.

Mexican and Brazilian stocks had started higher, aided in part by a report that U.S. new home sales in June rose 11% to a seasonally adjusted annual rate of 384,000 home sales, the biggest amount since November.

“While the rate of sales remains low by historical standards, June’s results offer further evidence that ample affordability and tax credits for first-time homebuyers are luring qualified potential buyers back into the housing market,” said Jared Franz, an associate economist at T. Rowe Price in a note.

A bottom for the housing market is key for mending the U.S. economy and, subsequently, spurring growth in economies worldwide.

Regional stocks then struggled throughout the session as Wall Street retreated from earlier gains after disappointing quarterly figures from health insurance provider Aetna Inc. and electronics retailer RadioShack Corp.

But U.S. stocks managed to closer higher on Monday. The Dow Jones Industrial Average (DJI) rose 0.2% to 9,108.91 and the S&P 500 Index (SPX) rose 0.3% to 982.18.

Regional investors also had to consider mixed views about global economic recovery.

In Brazil, a weekly central bank survey of economists showed they have lowered their forecast for economic activity in 2010. They now expect GDP to grow by 3.5%, down from 3.6% in the previous week.

Meanwhile, Bank of America-Merrill Lynch raised its forecast for China’s 2009 economic growth rate to 8.7% from 8%. Many market players expect China to pace growth among major economies, and the country’s demand for natural resources stands to benefit commodity-rich areas including Brazil and Chile.

Recent economic data “convinced the market that China’s recovery is real,” said Merrill economist Ting Lu in a note. Merrill also raised next year’s growth rate to 10.1% from 9.6%. China earlier this month reported a 7.9% economic expansion in the second quarter. Separately, China’s vice premier said stimulus measures have helped boost the country’s economy.

In Chile, central bank president Jose de Gregorio reportedly told lawmakers that he foresees economic recovery for the country beginning in the second half of this year.

In minutes from its July 9 interest-rate meeting, the central bank’s policy- makers said the implementation of measures to compliment monetary policy, including the offering of a liquidity line to financial institutions, was necessary because a rate cut alone wouldn’t have been enough to reach its 3% inflation target.

Chile’s central bank this year has slashed the benchmark interest rate to an historic low of 0.5% from 8.25%.

Chile’s IPSA equity index fell 0.3% to 3,239.80.