April 4, 2016 / 4:31 PM / 2 years ago

EMERGING MARKETS-Brazil shares, currency down on political woes; Petrobras drops

By Bruno Federowski and Paula Arend Laier
    SAO PAULO, April 4 (Reuters) - Brazil's stocks and currency
underperformed most Latin American peers on Monday as traders
worried that President Dilma Rousseff's efforts to fight
impeachment could prolong the country's already year-long
political crisis.
    Also pressuring shares of Petroleo Brasileiro SA 
was news the state-controlled oil company could cut fuel prices,
reducing the indebted company's revenues. 
    Petrobras, as the company is known, kept gasoline and diesel
prices artificially low for years, but made up for some of those
losses with hikes last year.
    A decrease would reflect lower oil prices abroad and weak
demand at the recession-mired economy, local media reported over
the weekend.
    "Despite these undeniably fair grounds, why do it now?"
analysts with BTG Pactual wrote in a client note.
    "With the entire investment community avidly monitoring
Brazil's political agenda, the timing of such a decision could
be heavily misinterpreted, negating some of the hard work done
in regaining investor confidence."
    Shares of sugar- and ethanol-related companies, such as
Cosan SA Industria e Comercio, fell on the news.
    Traders also worried that a recent rally in Brazilian
assets, triggered by expectations of leftist President
Rousseff's ouster, could be overdone. Some cited nascent
expectations that the government could gather enough votes in
Congress to avoid her impeachment.
    Other Latin American currencies also weakened on the back of
lower crude prices and expectations of higher U.S. interest
    Boston Federal Reserve President Eric Rosengren said on
Monday the U.S. central bank will likely raise rates sooner than
markets currently expect, a move which could drain capital away
from high-yielding emerging markets. 
    Those expectations helped drive the Colombian peso 
lower, even after minutes from the central bank's last policy
meeting hinted it will continue tightening policy over the
following months.
    Key Latin American stock indexes and currencies at 1600 GMT:
 Stock indexes                                daily %   YTD %
                                               change  change
 MSCI Emerging Markets                826.49     0.04    4.04
 MSCI LatAm                          2121.18    -1.86   18.12
 Brazil Bovespa                     49475.79    -2.15   14.13
 Mexico IPC                         45776.11    -0.62    6.51
 Chile IPSA                          3938.77    -0.22    7.03
 Chile IGPA                         19301.92     -0.2    6.34
 Argentina MerVal                   13027.11    -1.15   11.58
 Colombia IGBC                       9863.96    -0.26   15.40
 Venezuela IBC                      14621.95    -1.95    0.23
 Currencies                                   daily %   YTD %
                                               change  change
 Brazil real                          3.5973    -1.03    9.72
 Mexico peso                         17.4575    -0.66   -1.30
 Chile peso                            671.2    -0.30    5.74
 Colombia peso                       3071.95    -1.12    3.17
 Peru sol                             3.3581    -0.51    1.66
 Argentina peso (interbank)          14.7750     0.17  -12.13
 Argentina peso (parallel)             15.17     0.26   -5.93
 (Editing by James Dalgleish)
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