Emerging markets-LatAm stocks edge up, FX mixed ahead of Fed meeting as Middle East tensions linger
ILF•ILF•ILF•ILF•| Latin American market prices from Reuters | ||
| Equities | Latest | Daily % change |
| MSCI Emerging Markets .MSCIEF | 1585.19 | -3.54 |
| MSCI LatAm .MILA00000PUS | 3051.28 | 0.30 |
| Brazil Bovespa .BVSP | 176445.55 | 0.63 |
| Mexico IPC .MXX | 67421.96 | 0.39 |
| Chile IPSA .SPIPSA | 10854.93 | -0.98 |
| Argentina Merval .MERV | 3235795.04 | -2.103 |
| Colombia COLCAP .COLCAP | 2291.65 | 0.38 |
| Currencies | Latest | Daily % change |
| Brazil real BRL= | 5.1189 | -0.07 |
| Mexico peso MXN= | 17.4238 | 0.11 |
| Chile peso CLP= | 931.01 | 0.9 |
| Colombia peso COP= | 3195.6 | -0.19 |
| Peru sol PEN= | 3.3966 | 0.11 |
| Argentina peso (interbank) ARS=RASL | 1499.5 | -0.13 |
| Argentina peso (parallel) ARSB= | 1550 | 0.65 |
Inflation in Brazil slowed more than expected in the month to mid-July, moving closer to the central bank's target range, strengthening expectations of a fourth consecutive rate cut when the central bank meets in early August.
Policymakers had eased borrowing costs for a third straight meeting by 25 basis points, to 14.25%, last month.
"The drop in inflation in the first half of July strengthens the case for the central bank to continue its easing cycle at its meeting next week," said Liam Peach, senior emerging markets economist at Capital Economics.
The Brazilian real BRL= was subdued, while the main stock index .BVSP gained 0.6% to hit its highest level in two months.
Data showed that foreign direct investment in the region's largest economy jumped by one-third in the first half of the year, while the net oil exporter benefitted from higher oil prices, and robust soybean and beef exports.
Most equities in Latin America were higher on Tuesday and currencies were mixed as weaker commodity prices weighed on sentiment, with investors looking ahead to the U.S. Federal Reserve's policy meeting and assessing developments in the Middle East conflict.
Oil prices extended declines for a third straight session after a pause in U.S.-Iran hostilities, with President Donald Trump citing "good" talks with Iran even as he reiterated threats of military action. O/R
Caution lingered, however, as repeated shifts in rhetoric and policy from both Washington and Tehran have caught investors on the wrong foot on several occasions.
"Even in the event of a deal, one would expect that the market will need to continue to price in a large risk premium, given that recent events have demonstrated how quickly a deal can unravel," said Warren Patterson, head of commodities strategy at ING.
Attention now shifts to the Fed's two-day policy meeting starting later on Tuesday, with investors watching for any hawkish tilt from policymakers over inflation concerns due to still-disrupted energy supply from the Middle East.
The broader MSCI Latin American currency index .MILA00000CUS was muted, while the stocks equivalent .MILA00000PUS gained 0.3%.
Chile's central bank is expected to keep rates unchanged later in the day. The peso currency CLP= traded 0.9% higher, while stocks .SPIPSA slipped 1% to a one-week low.
The Colombian peso COP= declined 0.2%, but was still hovering near its strongest level in seven years, while equities .COLCAP rose 0.4%.
Colombia's central bank is expected to raise its benchmark interest rate on Friday, although it maybe nearing the end of its hiking cycle, a Reuters poll showed.
The Mexican peso MXN= firmed, while stocks .MXX advanced 0.4% to their highest level in over a month. Trump said on Tuesday that the trade agreement with Mexico and Canada is more important to those countries, while he "doesn't care" about it.
