October 14, 2016 / 2:04 PM / 2 years ago

EMERGING MARKETS-Brazil stocks rise as Petrobras cuts prices; rate futures fall

By Bruno Federowski
    SAO PAULO, Oct 14 (Reuters) - Brazilian stocks rose in early
Friday trading after state-controlled oil company Petróleo
Brasileiro SA announced a fuel price cut and a new pricing
    Preferred shares in Petrobras, as the company is
known, rose nearly 3 percent to the highest in two years, the
biggest driver on the benchmark Bovespa stock index.
    Petrobras said it will reassess prices on a monthly basis to
follow global markets more closely, without falling below
international prices, turning the page on years of politically
driven pricing that cost the company billions. 
    Though lower short-term fuel prices tend to hurt revenue,
increased transparency could help lure partners in refining
projects, BTG Pactual said in a sales note.
    Yields paid on interest rates futures <0#2DIJ:> fell as the
prospect of lower prices at the pump bolstered expectations of a
rate cut next week. 
    Rate futures priced a 65 percent chance of a 25 basis point
cut and a 35 percent chance of a 50 basis point cut in the
benchmark Selic rate. 
    "If fuel prices continue to decline in coming months the
central bank will have extra room to cut the Selic more
aggressively in 2017," Goldman Sachs economist Alberto Ramos
wrote in a client note.
    Other Latin American markets were slightly higher, with the
Mexican and Chilean pesos strengthening about
0.2 percent.
    Demand for emerging market assets has been tepid in recent
days as expectations grow that the Federal Reserve will raise
interest rates in December.
    Key Latin American stock indexes and currencies at 1345 GMT:
 Stock indexes                                 daily %   YTD %
                                                change  change
 MSCI Emerging Markets                899.14      0.95   12.15
 MSCI LatAm                          2516.91      1.98   34.88
 Brazil Bovespa                     61957.99      1.37   42.93
 Mexico IPC                         47992.24      0.53   11.67
 Chile IPSA                          4139.70      0.35   12.49
 Chile IGPA                         20731.35      0.36   14.21
 Colombia IGBC                       9993.53     -0.07   16.92
 Currencies                                    daily %   YTD %
                                                change  change
 Brazil real                          3.1725      0.24   24.41
 Mexico peso                         18.8855      0.24   -8.77
 Chile peso                            670.2      0.15    5.89
 Colombia peso                       2912.34      0.13    8.82
 Peru sol                              3.399      0.18    0.44
 Argentina peso (interbank)          15.1150      0.13  -14.11
 Argentina peso (parallel)              15.5      0.19   -7.94

 (Reporting by Bruno Federowski; Editing by Phil Berlowitz)
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