EMERGING MARKETS-LatAm assets mixed on US rate hike bets, Brazil political probe

In the second largest economy of LatAm, Mexico, industrial output rose 0.5% in July from June and was 2.7% higher year-over-year, the national statistics agency said on Friday. The Mexican stocks benchmark index `.MXX` dropped 0.4%. The peso `MXN=` added 0.1%. MSCI's LatAm FX index `.MILA00000CUS` was trading 0.1% lower, as a stronger U.S. dollar following the inflation reading weighed on regional currencies. Peru's central bank held its benchmark interest rate at 4.25% on Thursday, extending its pause for a 12th straight meeting, in line with market expectations. The sol `PEN=` fell 0.5%, while stocks in Lima `.MXNUAMPESCPGPE` edged higher 0.6%. Separately, Brazil's annual inflation slowed more than expected in August as consumer prices posted their steepest monthly decline in four years, strengthening the case for the central bank to deliver another interest rate cut next week. Elsewhere, in the U.S. consumer prices accelerated in August as the cost of gasoline rebounded after two straight monthly declines, bolstering financial market expectations that the Federal Reserve could raise interest rates next week. Markets currently see an 85.4% chance of the Fed raising its interest rate at its meeting next week, up from 72.4% a day ago. "Latin American central banks used to closely follow the Federal Reserve's policy moves, but since the pandemic they have become much more proactive and independent," said Malcolm Dorson, head of EM Strategy at Global X. "Even if the Fed hikes next week, I expect Brazil to either remain on hold or cut. I think Mexico will remain on hold." Oil prices eased on Friday but remained north of $100 a barrel. While net oil exporters in the region have benefited from higher crude prices, fears persisted that prolonged inflation could impact central bank policy outlooks. Latin American assets were mixed on Friday as investors assessed a key U.S. inflation report that increased expectations of the Federal Reserve hiking interest rates next week, while an investigation involving a Brazilian presidential candidate weighed on sentiment. MSCI's gauge tracking LatAm stocks `.MILA00000PUS` dipped 0.5%, but was still on track to eke out a marginal weekly gain. Brazil's Supreme Court opened an investigation in July into Senator Flavio Bolsonaro over alleged corruption and money laundering crimes as part of a broader probe into failed lender Banco Master, according to a court document unsealed on Friday. The development could weigh on Brazilian assets if investors view it as denting Bolsonaro's chances in next month's presidential election. He has denied wrongdoing in previous comments about allegations in connection with the investigation. Recent polls have pointed to a close race between Bolsonaro and incumbent President Luiz Inácio Lula da Silva, helping support Brazilian assets as Bolsonaro is seen by markets as more business-friendly. Local equities index `.BVSP` fell 0.5%, while the real `BRL=` strengthened 0.1%.

EMERGING MARKETS-LatAm assets mixed on US rate hike bets, Brazil political probe

Mexico and Peru market moves

Brazil and U.S. inflation outlook

LatAm assets mixed after U.S. inflation data

Brazil probe and inflation data weigh on sentiment

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