EMERGING MARKETS-Brazil underperforms after Moody's cuts country to junk
(Updates with latest prices) By Bruno Federowski SAO PAULO, Feb 24 (Reuters) - The Brazilian stock index underperformed Latin American markets on Wednesday after Moody's Investors Service became the latest ratings agency to cut the country's debt rating to junk, downgrading it by two notches. Other Latin American indices mostly erased earlier losses after a rally in oil prices, lifting markets in commodity-exporting countries. Citing economic and political turmoil, Moody's became the third major agency to downgrade Brazil's debt to junk, cutting it two notches to Ba2. "The market expected a cut but the magnitude caught me by surprise," said Thiago Castellan Castro, a trader with Renascença brokerage in São Paulo. Brazil's Bovespa index closed down 1.1 percent, compared to just a 0.1 percent loss on Mexico's main stock index . Shares of state-controlled oil company Petroleo Brasileiro SA, whose rating will likely also be lowered soon on the back of the sovereign downgrade, fell as much as 5 percent. Nevertheless, traders saw limited room for weakness, pointing out that Brazilian credit default swaps (CDS) had been trading at levels consistent with a lower rating even before the downgrade. The Brazilian real, meanwhile, reversed earlier losses to end up 0.1 percent after oil rallied as much as 3 percent after news of stalled loadings in the North Sea and strong demand for gasoline. The news also helped lift Mexico's peso and erase most losses for Colombia's peso. Argentina's MerVal stock index rose 0.7 percent to its highest in more than two months after the country and major creditors neared a deal to resolve a long-running $5 billion litigation. Latin American stock indexes and currencies at 2100 GMT: Indexes Latest Daily pct YTD pct change change MSCI Emerging Markets 737.52 -0.97 -6.22 MSCI LatAm 1,779.48 -0.47 -2.29 Brazil Bovespa 42,049.93 -1.11 -3.00 Mexico IPC 43,175.70 -0.09 0.46 Chile IPSA 3,678.46 -1.02 -0.05 Chile IGPA 18,090.68 -0.82 -0.34 Argentina MerVal 12,627.13 0.74 8.15 Colombia IGBC 8,982.05 -0.15 5.09 Venezuela IBC 16,674.77 2.36 14.30 Currencies Daily pct YTD pct change change Latest Brazil real 3.9558 0.11 -0.22 Mexico peso 18.1950 0.05 -5.60 Chile peso 695.8 -0.02 1.96 Colombia peso 3,335.97 -0.36 -5.26 Peru sol 3.5291 0.03 -3.37 Argentina peso (interbank) 15.3450 0.03 -18.20 Argentina peso (parallel) 15.53 -0.65 -8.83 (Additional reporting by Paula Arend Laier and Anna Yukhananov)
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