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Mexican stocks rise after U.S. factory data

NEW YORK (MarketWatch) -- Mexican stocks turned higher Tuesday following a strong rise in factory orders from the U.S., Mexico's largest trading partner, and Brazilian equities extended their gain into a third day.

Mexico's IPC index (IPC) rose 0.9% to 40,453, led by industrial, transportation and home building issues. Shares of OHL Mexico (OHLMEX) , the Mexican unit of Spanish construction company Obrascon Huarte Lain (OHL) , surged 5.8% to led advancers on the index. Shares of appliance retailer Grupo Elektra (ELEKTRA) rose 4.6%.

The equity market got a lift after the U.S. Commerce Department said factory goods rose 0.7% in May. Analysts polled by MarketWatch expected a rise of 0.1%.

Investors in Mexican assets watch U.S. data as Mexico sends about 80% of its goods to the U.S.

The Mexican market is still assessing the Mexican presidential win by Enrique Peña Nieto, leader of the Institutional Revolutionary Party, or PRI. Analysts say he faces the challenge of introducing tax and oil monopoly reforms that were main themes of his campaign, and Peña Nieto would need congressional support to bring them through. The opposition National Action Party, or PAN, led by current president Felipe Calderón, had held the presidency since 2000.

Preliminary results from Sunday's election show the PRI failed to secure congressional majorities, "but Peña Nieto said he'll reach agreement with other parties to open the oil sector for private investment and improve the country's tax code, social security system and labor rules," said analysts at Itaú BBA on Tuesday. "It is widely believed, however, that the PAN will not block reforms as the PRI did during the PAN's stint in power."

In Brazil, the Ibovespa (BVSP) stock index gained 2.3% to 55,920, led by home building, retail and steel stocks. But shares of Brazil's largest electricity distributor Eletropaulo Metropolitana Eletricidade de Sao Paulo (ELPL4) plummeted 11%. The state regulator reduced Eletropaulo's tariffs by 9.3%, the company said Monday. Meanwhile, shares of electric utility company CPFL Energia SA (CPFE3) lost 4%.

Investors also received a report from Brazil's statistics agency IBGE that industrial production declined 0.9% in May compared with April. Production in May fell 4.3% on a year-over-year basis. The consensus estimate called for a monthly decline of 0.6% and 3.3% decline for the year.

The year-over-year fall was the worst since February of 2010, said David Beker, the chief Brazilian economist & fixed-income strategist at Bank of America Merrill Lynch, in a note to clients.

"Despite the fact that the government has announced several stimulus measures, two key factors are delaying the recovery: high inventory levels and weak credit markets affecting durable-goods sales," wrote Beker. "The bottom line is that stimulus measures may create some short-term boost for economic activity, but will unlikely be a game changer. We expect more stimulus ahead, including cuts in reserve requirements."

Elsewhere in Latin America, Chile's IPSA equity index (IPSA) rose 0.3% to 4,412 and Argentina's Merval (MERV) climbed 1.8% to 2,412.