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EMERGING MARKETS-Hot inflation data hits EM, Latam assets underperform peers

reuters.com · 06/10/2022 15:51
EMERGING MARKETS-Hot inflation data hits EM, Latam assets underperform peers

Brazil real eyes worst week in over two years

Red-hot U.S. inflation sparks dollar rally

Peru's sol edges up after rate hike

Updates prices, details

By Shreyashi Sanyal

- Latin American stocks and currencies fell on Friday and were set to end the week with declines far greater than those of other emerging market peers, with Brazil's real falling on worries of lockdowns in China and red-hot inflation boosting the dollar.

The MSCI's index for Latin American stocks .MILA00000PUS fell 2.6% and could mark a weekly decline of 7.6%. Equities were headed for their sharpest weekly fall in more than 15 months. The broader emerging markets stocks index .MSCIEF shed 1.3% for the week.

Worries of slowing demand from major trading partner China has hurt markets in Latin America as Shanghai announced new COVID-19 lockdown measures this week. nL1N2XX03P

Rising inflationary pressures along with tighter monetary policies from central banks in major economies have also pushed investors away from riskier assets such as those in emerging markets.

MSCI's currencies index .MILA00000CUS dropped 1.6% on Friday and 3.1% for the week, marking its worst performance since late September 2020. A red-hot reading on U.S. consumer prices for the month of May not only boosted the dollar =USD but also solidified bets of more tightening by the Federal Reserve. nL1N2XW25Z

"Some of the Latam countries are sensitive to tightening of financial conditions globally and given that we saw the stock market in the U.S. having a hard time in part because of the Fed, that's something that is also affecting the Latam region," said Jakob Christensen, chief analyst and head of EM research at Danske Bank.

Markets around the globe will be watching the U.S. Fed policy decision next week, where the central bank is expected to hike lending rates by 50 basis points.

Brazil's real BRBY, BRL= touched 5 to the dollar. The currency is down 4.1% for the week, marking its worst weekly decline in over two years.

Brazil's central bank is expected to deliver a 50 basis-point rate increase on Wednesday, according to a Reuters poll, to end a long tightening cycle against unbridled inflation that is beginning to see some results. nL1N2XX0FQ

Brazilian stocks .BVSP fell 1.2%, with state-run oil company Petrobras PBR A down 1.1% after it received a court decision ordering it to halt talks with Petroreconcavo RECV3.SA and Eneva SA ENEVY for the sale of its Bahia-Terra cluster. nS0N2X5028

Brazil's government on Thursday night moved forward with its bid to privatize Eletrobras EBR, Latin America's largest utility, as it priced a share offering. Shares of the company tumbled 4.7%. nL1N2XW1F7

Lower commodity prices also hurt other Latin American currencies. Chile's peso CLP= slipped 1.6% on lower copper prices, while falling oil prices hurt Colombia's peso COP=, which dropped 1.7%.

The Mexican peso MXN= fell 1.4%, while Peru's sol PEN= edged 0.2% up as it was supported by an interest rate hike by its central bank overnight. nL1N2XW30F


Key Latin American stock indexes and currencies at 1930 GMT:

Stock indexes

Latest

Daily % change

MSCI Emerging Markets .MSCIEF

1052.97

-1.33

MSCI LatAm .MILA00000PUS

2252.05

-2.5

Brazil Bovespa .BVSP

105758.53

-1.25

Mexico IPC .MXX

48685.88

-1.23

Chile IPSA .SPIPSA

5223.38

0.75

Argentina MerVal .MERV

88601.56

-0.302

Colombia COLCAP .COLCAP

1528.49

0.11




Currencies

Latest

Daily % change

Brazil real BRBY

4.9785

-1.29

Mexico peso MXN=D2

19.9435

-1.44

Chile peso CLP=CL

844.1

-2.27

Colombia peso COP=

3935

-2.45

Peru sol PEN=PE

3.7551

-0.31

Argentina peso (interbank) ARS=RASL

121.7900

-0.12

Argentina peso (parallel) ARSB=

207

0.48



(Reporting by Shreyashi Sanyal, Bansari Mayur Kamdar and Anisha Sircar in Bengaluru; Editing by Alistair Bell and Cynthia Osterman)

((Shreyashi.Sanyal@thomsonreuters.com; +1 646 223 8780; +91 961 144 3740; Twitter: https://twitter.com/s_shreyashi;))