September 6, 2016 / 4:07 PM / 2 years ago

EMERGING MARKETS-Latam currencies rally on weak U.S. services data

By Bruno Federowski
    SAO PAULO, Sept 6 (Reuters) - Latin American currencies
rallied on Tuesday as weak U.S. services data reinforced doubts
over the possibility of an interest rate hike this year.
    The pace of growth in the U.S. economy's service sector
decreased by the most since the 2008 financial crisis in August
from July, falling short of expectations in a Reuters poll of
    Concerns over the United States' economic health have been
growing steadily since last week's tepid payrolls report caught
investors by surprise. 
    Bets that the Federal Reserve could increase interest rates
in August fell following the release of the ISM report, while
the odds of a December increase were about even, according to
CME Group's FedWatch tool.
    Lower U.S. rates would benefit Latin American currencies,
which typically lure investors with yields.
    However, stock markets in the region were mixed, weighed
down by lower crude prices and concerns over possible spillovers
stemming from weakness in the world's No. 1 economy.
    Brazil's benchmark Bovespa stock index was nearly
flat as shares of state-controlled oil company Petróleo
Brasileiro SA  fell after hitting their
highest in over a year on Monday.
    Losses were limited by a rise in shares of planemaker
Embraer SA, the eighth in a row. Traders have been
scooping up Embraer shares for days following a more than 50
percent slump so far this year.
    Shares of meatpacker JBS SA fell as much as 8.3
percent but later pared losses to trade 3.3 percent lower.
    Investors fear Chief Executive Wesley Batista could be
forced to step down as part of an investigation over an
investment of holding company J&F Investimentos in pulpmaker
Eldorado Brasil SA. 
    BTG Pactual analysts lowered their recommendation for the
stock to "neutral" and reduced their price-target to 13 reais,
from 10.85 reais currently.
   They cited concerns over a bumpy succession process, possible
delays in the implementation of a corporate reorganization plan
and higher leverage.
    Key Latin American stock indexes and currencies at 1550 GMT:
 Stock indexes                               daily %    YTD %
                                              change   change
 MSCI Emerging Markets               924.76     1.67    14.54
 MSCI LatAm                         2474.94     1.18    33.68
 Brazil Bovespa                    59531.85    -0.06    37.33
 Mexico IPC                        47522.73    -0.67    10.58
 Chile IPSA                         4110.43    -0.48    11.69
 Chile IGPA                        20418.44    -0.38    12.49
 Argentina MerVal                  16076.94     0.44    37.70
 Colombia IGBC                     10280.01    -0.24    20.27
 Venezuela IBC                     11917.77     0.55   -18.31
 Currencies                                  daily %    YTD %
                                              change   change
 Brazil real                         3.2272     1.65    22.30
 Mexico peso                        18.3480     1.20    -6.09
 Chile peso                           663.6     1.46     6.95
 Colombia peso                      2884.02     1.77     9.89
 Peru sol                             3.372     0.74     1.25
 Argentina peso (interbank)         14.9850     0.17   -13.36
 Argentina peso (parallel)            15.32     0.39    -6.85

 (Reporting by Bruno Federowski; Editing by Jonathan Oatis)
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