June 3, 2019 / 7:55 PM / 6 months ago

EMERGING MARKETS-Latam FX gains against softer dollar as Fed rate cut hopes boosted

 (Recasts throughout; updates prices, adds market strategist's
quote)
    By Aaron Saldanha
    June 3 (Reuters) - Most Latin American currencies firmed on
Monday against a dollar weakened by dovish comments from a
Federal Reserve official, while a Latin American stocks
benchmark marked time as broad regional gains were tempered by
losses among Brazilian shares.
    St. Louis Federal Reserve President James Bullard aided
sentiment towards developing world assets, saying lower U.S.
borrowing costs "may be warranted soon" given the rising risk to
economic growth posed by factors including global trade
tensions.        
    The stance marks a stark departure from 2018, when a slew of
U.S. rate hikes raised returns on holding dollars, playing a
significant part in an exodus of capital from emerging markets.

    MSCI's index of Latin American currencies
ticked higher, while its Latin American stocks index
 dipped 0.1%, weighed on by shares of Brazilian
firms on the benchmark. 
    Brazil's real firmed 0.7%, also helped by the head of
the central bank saying it will focus on an agenda of 'micro'
measures and initiatives to boost credit and lending.

    The Bovespa fell 0.5%, weighed down by losses among 
materials and consumer staples.
    A representative of a leading Brazil-based beef exporter
confirmed on Monday that the country's agriculture ministry has
suspended beef exports to China after a case of mad cow was
reported.
    Shares of JBS SA, the world's largest
meat-packer, dropped 3.2%. Marfrig Global Foods fell
3.3%, while Minerva SA slid almost 5%.
    Miner Vale SA fell 1%, with Dalian-traded iron
ore futures having slid 3.5% earlier in the global
day.
    Petroleo Brasileiro SA's (Petrobras) common and
preferred shares rose 2% and 1.5%, respectively,
shaking off pressure from lower Brent crude futures.

    The state-run oil firm said it is looking to divest two sets
of onshore oil and gas assets.
    While Mexican stocks gained 1%, the peso was
conspicuous in its weakness, softening 1.3%. 
    Yields on local, 10-year bonds held at 8.08%,
around Friday's closing level, which was a more than one-week
closing peak.
    U.S. President Donald Trump's threat to impose tariffs on
Mexico prompted further skittishness on the part of investors in
Latin America's No.2 economy, coming at a time when state-owned
oil firm Petroleos Mexicanos (Pemex) is financially ailing.

    "The current overall economic strategy could be better in
the sense that it (Mexico) could take advantage of the
achievements of the past 25 years on the macro front and focus
on the micro challenges instead," Federico Kaune, head of
emerging markets fixed income at UBS Asset Management, told the
Reuters Global Markets Forum.
    "Pemex needs a substantial overhaul and financial resources;
it is not clear either is likely to happen without weakening the
fiscal situation of the sovereign."
    Argentina's stocks declined 1.3%, while the peso
 softened.

    Latin American stock indexes and currencies at 1900 GMT

    
 Stock indexes                                  daily
                                      Latest        %
                                               change
 MSCI Emerging Markets               1,008.68    1.07
 MSCI LatAm                          2,681.80   -0.07
 Brazil Bovespa                     96,547.62    -0.5
 Mexico IPC                         43,185.46    1.02
 Chile IPSA                          5,011.49    0.69
                                               
 Argentina MerVal                   33,512.32   -1.29
                                                     
 Currencies                                     daily
                                                    %
                                       Latest  change
 Brazil real                           3.8977    0.64
 Mexico peso                          19.8723   -1.31
                                               
 Chile peso                             701.6    1.07
 Peru sol                                3.36    0.62
 Argentina peso (interbank)           44.8500   -0.22
                                               
 
 (Reporting by Aaron Saldanha in Bengaluru and Michael Connor in
New York
Editing by James Dalgleish)
  
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