July 29, 2019 / 8:30 PM / 4 months ago

EMERGING MARKETS-Latam currencies ease ahead of Fed meet; stocks edge higher

    * Markets priced for U.S. rate cut, eye Fed guidance
    * Brazil central bank seen cutting rates to record low 
    * Peru markets shut for local holiday  

 (Updates with closing price)
    July 29 (Reuters) - Latin American currencies fell on Monday
and most regional stock indexes crept higher, as the U.S. dollar
strengthened and investors awaited clues this week from the
Federal Reserve meeting on monetary policy.
    Currencies from Chile, Mexico, Brazil,
Colombia and Argentina slipped between 0.2% and
1.4%.
    The Brazilian real, however, gave up some early losses after
President Jair Bolsonaro said his far-right government intends
to send to Congress at the start of next month a bill to lower
taxes.
    Emerging market assets have rallied this year on hopes that
major central banks will cut interest rates in the face of
slowing growth. Interest rate futures are fully priced for a
quarter-point rate cut from the Fed on Wednesday and investors
will keep a tab on what the U.S. central bank flags for the
future. 
    "The 25 bps cut is already priced in so it will require more
than that for the markets to lift off from here, possibly a more
dovish rhetoric or hints at future rate cuts," said Christian
Lawrence, senior Latam FX strategist, Rabobank.
    Central banks of developing economies including those in
South Africa, Russia and Turkey have already cut key interest
rates in the past fortnight, with Brazil's central bank expected
to follow suit.   
    Economists polled by Reuters expect the Banco Central to cut
its benchmark interest rate to a record low on Wednesday to
revive a sagging economy and bring inflation back up toward
target.
    "For the central bank of Brazil, the debate is, just like
for the Fed, if the first cut will be 25bp or 50bp. The market
sees total cuts of 120bp," Citi analysts wrote in a note.
    "This compares to 100bp forecast by our economists. This
would suggest that the rally in Brazil rates is mature."
    Brazil, Latin  America's largest economy, is struggling to
emerge from a crippling recession, with the government focused
on passing through Congress a pension overhaul it hopes will
prop up public finances and kick-start growth.
    Most regional stock indexes edged higher. Sao Paulo-traded
stocks were supported by a jump in shares of brewer
Ambev SA and the state-run oil firm Petrobras
. 
    Mexican stocks gained over 1%, its second day of rise
in the past 10 days as investors digested second-quarter
earnings reports. President Andres Manuel Lopez Obrador said the
country was not in recession and the economy was performing
increasingly well, rejecting concerns that it may have
contracted for two consecutive quarters.
    The Argentine peso weakened as investors turned cautious
ahead of the presidential election to be held later this year.
Opinion polls analyzed by Reuters this month showed the election
would likely go to a runoff with no clear winner emerging from
the first-round vote on Oct. 27.
    Markets in Peru were shut for a local holiday. 
    
 Key Latin American stock indexes and currencies at 1951 GMT
    
     Stock indexes          Latest     Daily
                                        pct
                                      change
 MSCI Emerging Markets      1,046.04    -0.25
                                      
 MSCI LatAm                 2,874.17     0.51
                                      
 Brazil Bovespa           103,263.78     0.43
                                      
 Mexico IPC                41,329.28     1.61
                                      
 Chile IPSA                 5,000.02     0.38
                                      
 Argentina MerVal          42,814.36     1.98
                                      
 Colombia IGBC             12,850.89     0.12
                                      
                                             
       Currencies           Latest     Daily
                                        pct
                                      change
 Brazil real                  3.7809    -0.25
 Mexico peso                 19.0702    -0.18
 Chile peso                    696.1    -0.17
 Colombia peso               3,283.1    -1.38
 Peru sol                      3.297     0.00
 Argentina peso              43.8200    -1.10
 (interbank)                          
 
 (Reporting by Agamoni Ghosh and Sruthi Shankar in Bengaluru; 
Editing by Sandra Maler)
  
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