EMERGING MARKETS-Brazil real underperforms Latam currencies on S&P downgrade
By Bruno Federowski SAO PAULO, Feb 18 (Reuters) - The Brazilian real underperformed Latin American currencies on Thursday after Standard & Poor's downgraded the country deeper into junk territory. Citing considerable economic and political challenges, S&P cut Brazil's sovereign grade rating to BB from BB+ with a negative outlook. Traders said the cut means it will take longer for Brazil to recoup its investment grade once it manages to escape ongoing economic and political crisis. BNP Paribas, however, pointed out in a client note that Brazilian credit default swaps were already trading at BB levels even before the downgrade. S&P's decision contributed to a drop in shares of Brazilian banks, which are particularly sensitive to ratings decisions. Stocks of Itaú Unibanco SA and Banco Bradesco SA were also pressured by a price-target cut by Credit Suisse. Weaker-than-expected corporate results from Usinas Siderúrgicas de Minas Gerais SA helped drive Brazil's benchmark Bovespa stock index lower. Losses were limited by a rise in shares of Braskem SA after the company posted a 65 percent increase in earnings in the fourth quarter. Other Latin American markets were mostly higher as oil prices extended their rally on expectations of an agreement to freeze global output. The Mexican peso jumped for a second day after the country announced a surprise interest rate hike, a new intervention policy and budget cuts. The currency has been strongly hit by weakness in the price of oil, which accounts for a large share of the country's exports and tax revenue. Venezuela, also a major oil producer, devalued its currency and raised heavily subsidized fuel prices on Wednesday as it grapples with galloping inflation and a deep recession. "Although the adjustments are positive and cannot be considered negligible, probably even exceeding market expectations, we remain of the opinion that they are too little and probably come too late," Barclays analyst Alejandro Arreaza wrote in a client note. Yields paid on Venezuela's benchmark global 2027 bond fell even after the central bank said the country's inflation hit 180.9 percent and the economy contracted 5.7 percent last year. Latin American stock indexes and currencies at 1405 GMT: Stock indexes daily % YTD % change change Latest MSCI Emerging Markets 746.53 1.46 -7.35 MSCI LatAm 1772.46 0.13 -3.26 Brazil Bovespa 41587.91 -0.1 -4.06 Chile IPSA 3739.45 0.02 1.61 Chile IGPA 18342.86 0.02 1.05 Currencies daily % YTD % change change Latest Brazil real 4.0036 -0.29 -1.41 Mexico peso 18.1835 0.97 -5.24 Chile peso 698.1 0.30 1.66 Colombia peso 3347.65 0.24 -5.33 Peru sol 3.501 0.06 -2.49 Argentina peso (interbank) 14.9700 0.20 -13.28 Argentina peso (parallel) 15.27 -1.24 -6.55 (Additional reporting by Paula Arend Laier; Editing by Bernadette Baum)
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