Emerging Markets-LatAm assets recover amid oil surge; caution prevails ahead of Fed, Copom decisions

Most Latin American assets recovered on Tuesday after a sell-off in the previous session, while global sentiment was kept in check by surging oil prices and bond yields ahead of the U.S. Federal Reserve's policy decision later this week. MSCI's index tracking LatAm stocks `.MILA00000PUS` gained 0.2%, while a corresponding currencies gauge `.MILA00000CUS` edged higher 0.3%. Elsewhere, oil prices rose on Tuesday after attacks on Saudi Arabian energy infrastructure left the kingdom's East-West Pipeline offline. `O/R` Elevated energy prices have supported assets among the net oil exporters in the region, though prolonged strength in crude prices continue to fan inflationary fears and push global bond yields to multi-year highs as central banks globally are gearing up for a higher-rate environment. Markets will also pay close attention to the Federal Reserve's interest rate decision on Wednesday where it is expected to hike rate by 25-basis points, according to CME's FedWatch Tool. Back in Latin America, Colombia's budget remained in focus. Colombia's Congress on Monday approved the government's 2027 spending budget of 634.9 trillion pesos ($206.6 billion), amid a sharp deterioration in public finances that is expected to push the fiscal deficit to a record high next year. The approval comes despite warnings from the country's fiscal watchdog of a critical fiscal outlook if the plan went through. Colombian stocks `.COLCAP` eased 0.3%, while the peso `COP=` strengthened 0.2%. The country recently inaugurated government of right-wing President Abelardo De La Espriella and has been grappling with worsening public finances inherited from the previous administrations. In Chile, the peso `CLP=` inched higher 0.2% after touching its lowest level in 11 months on Tuesday. Political updates remained in the spotlight in the region's largest economy, Brazil. According to a CNT/MDA poll released on Tuesday, Brazilian President Luiz Inacio Lula da Silva would beat right-wing Senator Flavio Bolsonaro if they were in a second-round runoff in next month's election. This follows a host of other survey's pointing to a tight presidential race ahead of the October election, with markets closely tracking shifts in political sentiment. Investors consider Senator Bolsonaro market friendly and assets have tended to rally when his chances improve, and vice versa. The Brazilian benchmark stocks index `.BVSP` inched higher 0.2% after falling 0.9% on Monday. The real `BRL=` firmed. Meanwhile, Brazil's retail sales fell more than expected in July, data from statistics agency IBGE showed, underscoring the drag of high borrowing costs on consumer spending. "High borrowing costs are weighing most heavily on discretionary and durable purchases, while resilient employment and real-income growth continue to provide some support to essential spending," said Andrés Abadía, chief Latin America economist at Pantheon Macroeconomics. Investor focus will also turn to Brazilian Central bank monetary policy committee (Copom) rate decision on Wednesday, where it is expected to ease interest rates to 13.75% from 14.00%, according to a Reuters poll.

Emerging Markets-LatAm assets recover amid oil surge; caution prevails ahead of Fed, Copom decisions

LatAm assets recover as oil prices surge

Oil, Fed and Colombia budget draw attention

Brazil politics and retail data stay in focus

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