* Brazil’s economic activity falls more than expected in August * Peru economic growth picks up somewhat in August from July * Latam currencies down 0.1%, stocks add 1.5%. (Adds market details, updates prices) By Bansari Mayur Kamdar and Devik Jain Oct 17 (Reuters) – The Brazilian real and Mexican peso rose on Monday against a softer dollar, while regional stock indexes tracked a rally on Wall Street as investors took heart from a reversal in the United Kingdom’s fiscal plan which had sent jitters across the markets in recent weeks. The real gained 0.6% against the dollar, while the peso added 0.3%. The broader Latin American currencies index inched 0.1% lower. “In a number of the Latam countries, especially Brazil, the balance sheets are decent, they have current account surpluses. They’ve been some of the best places to hide in the EM space as they are holding their weight against the dollar more so than others,” said Rachel Ziemba, founder of Ziemba Insights. “But ultimately this is still an environment where, with more Federal Reserve hikes to come, it’s going to be hard for EM and risk assets to hold much ground.” Economic activity in Brazil fell much more than expected in August, a central bank index showed. “The question is whether negative economic surprises like this could tip the balance of risks against the incumbent (President Jair Bolsonaro) in the hotly contested presidential elections,” Natalia Gurushina, EM fixed income economist at VanEck, said in a note. “The next important data point is mid-month inflation (out on Oct. 25) – and further disinflation is a ‘must’ both for Bolsonaro and the central bank, which contemplates ending its aggressive tightening cycle.” Analysts predict the central bank’s aggressive monetary tightening to tame inflation should impact activity in the second half, overshadowing the effects of increased public spending by Bolsonaro’s government. A poll published on Monday showed leftist former president Luiz Inacio Lula da Silva is leading right-wing Bolsonaro with 48.1% voter support against the incumbent’s 41.8% ahead of an Oct. 30 runoff vote. “As far as going into the second round, we do think that Lula will probably win. Past the election we are somewhat less concerned about Lula related FX volatility – and part of that goes back to Lula understanding that Brazil’s public finances are in a difficult spot,” said Brendan McKenna, international economist and FX strategist at Wells Fargo Securities. “So we have a view that a lot of the BRL depreciation is going to be more Fed driven than politically driven.” Brazil’s Bovespa index added 1.7%, with planemaker Embraer SA climbing 6.4% after saying it had closed a $650 million revolving credit facility with a group of national and international financial institutions. Overall, Latin American stocks advanced 1.5%, tracking a stellar rally on Wall Street after Britain’s new finance minister ditched most of the government’s “mini-budget,” while better than expected earnings from Bank of America helped to boost risk appetite. The dollar index dipped 0.8%. The Peruvian sol rose 0.3% after data showed economic growth picked up slightly in August. Chile’s peso slid nearly 1% against the dollar. In Argentina, the government will give workers tax relief from November by raising the threshold at which income tax is charged, as the country battles with inflation forecast to climb as high as 100% by the end of the year. Key Latin American stock indexes and currencies at 1949 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 866.14 0.33 MSCI LatAm 2153.87 1.5 Brazil Bovespa 113986.05 1.71 Mexico IPC 46363.99 2.03 Chile IPSA 5103.06 2.63 Argentina MerVal 139110.96 1.326 Colombia COLCAP 1168.32 -0.79 Currencies Latest Daily % change Brazil real 5.2914 0.60 Mexico peso 20.0137 0.30 Chile peso 971.4 -1.18 Colombia peso 4729.13 -0.78 Peru sol 3.966 0.30 Argentina peso (interbank) 152.5000 -0.54 Argentina peso (parallel) 283 2.47 (Reporting by Bansari Mayur Kamdar and Devik Jain in Bengaluru Editing by Mark Potter and Matthew Lewis)
Source: finance.yahoo.com
