July 31, 2017 / 5:27 PM / a year ago

EMERGING MARKETS-Venezuela bonds fall on U.S. sanction fears, Mexico peso slips

    By Bruno Federowski and Sujata Rao
    SAO PAULO, July 31 (Reuters) - Venezuelan dollar bonds fell
on Monday as traders fretted over potential U.S. sanctions after
a weekend election seen as  increasing the powers of leftist
President Nicolas Maduro.
    Opposition parties boycotted the election for a
constitutional super-body that Maduro said would begin a "new
era of combat," saying it was rigged. Ten people were killed in
nationwide protests, making Sunday one of the deadliest days
since massive protests started in early April.
    U.S. officials said Washington was considering sanctions on
Venezuela's vital oil sector in response to the election, which
it called flawed.
    Venezuela's sovereign and quasi-sovereign dollar bonds,
mostly fell across the curve, extending Friday's large falls.
    Venezuela's benchmark sovereign bond maturing 2038
 fell almost one cent at one point before snapping
back to trade at around 40 cents in the dollar. It stayed off
13-month lows hit on Friday, Thomson Reuters data showed.
    Dollar bonds issued by state oil firm PDVSA tumbled across
the curve.
    There was little sign of spillover into other Latin American
markets, however, with most currencies range-bound. The Mexican
peso underperformed, weakening 0.3 percent after a
report showed economic growth slowing in the second quarter.

    "Uncertainty with regard to the outcome of the 2018
presidential election and renegotiation of the NAFTA treaty are
likely to continue to have a negative impact on activity,"
Goldman Sachs economists wrote in a report.
    "Important investment decisions may be postponed, scaled
down or even canceled, particularly in export-oriented sectors."
    Trading volumes were muted in Brazilian markets as investors
avoided making risky bets as the end of a congressional recess
approached. Lawmakers are expected to vote on Wednesday whether
to authorize the nation's top court to rule on corruption
accusations against President Michel Temer.
    Traders widely expect Temer, whose platform of structural
reform is considered critical by investors to boosting growth in
Latin America's largest economy, to be cleared by the lower
house of Congress.
    Still, the prosecutor-general's office is likely to file
additional charges against the Brazilian leader in coming
months, potentially delaying a planned pension reform further.
    Brazil's benchmark Bovespa stock index rose 0.4
percent, boosted by shares of miner Vale SA as iron
ore prices surged. China-listed iron ore futures on Monday hit
their trade limit-up, underscoring concerns over tight supply
amid environmental inspections and strong restocking demand.

    Shares of IRB Brasil Resseguros SA jumped 6.8
percent in their market debut after shareholders in Brazil's
largest reinsurer raised almost 2 billion reais ($639 million)
in an initial public offering last week.
    Key Latin American stock indexes and currencies at 1705 GMT:
 Stock indexes                                 daily %   YTD %
                                      Latest    change  change
 MSCI Emerging Markets                1064.84     0.18   23.28
 MSCI LatAm                           2744.71    -0.05   17.32
 Brazil Bovespa                      65741.23     0.37    9.16
 Mexico S&P/BVM IPC                  51024.15    -0.37   11.79
 Chile IPSA                           5044.71    -0.62   21.52
 Chile IGPA                          25217.45    -0.54   21.62
 Argentina MerVal                    21458.84    -1.06   26.84
 Colombia IGBC                       10910.35    -0.94    7.72
 Venezuela IBC                      139399.38     2.65  339.67
 Currencies                                    daily %   YTD %
                                                change  change
 Brazil real                           3.1280     0.17    3.87
 Mexico peso                          17.8495    -0.33   16.22
 Chile peso                             651.9     0.29    2.88
 Colombia peso                        2994.48     0.06    0.23
 Peru sol                               3.238     0.22    5.44
 Argentina peso (interbank)           17.6700     0.74  -10.16
 Argentina peso (parallel)              18.02     2.28   -6.66
 (Writing by Bruno Federowski; Editing by Tom Brown)
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