EMERGING MARKETS-LatAm stocks set for weekly fall as firmer dollar, Mideast tensions hurt sentiment

On the FX front, the dollar index **=USD** was stable. It lost ground earlier in the week after softer-than-expected inflation readings in the U.S., which prompted traders to scale back on expectations of an imminent Federal Reserve rate hike. On Friday, currencies in Mexico **MXN=** and Peru **PEN=** depreciated 0.6% and 0.3%, respectively, while Chile's **CLP=** weakened 1% against the dollar. Colombia's peso **COP=** was largely flat. Most Latin American assets were swept up in a global risk-off wave on Friday, with stocks on track for weekly losses as a pullback in tech stocks and intensifying U.S.-Iran hostilities dented risk appetite. MSCI's Latin American equity index **.MILA00000PUS** edged 0.3% lower, while the region's currencies **.MILA00000CUS** also weakened 0.3% against the dollar. The currencies index was set for marginal weekly gains, if they held through close. Tensions in the Gulf region intensified with U.S. strikes on Iran, and Tehran saying it had closed the Strait of Hormuz this week, after a fragile ceasefire agreement collapsed. Energy infrastructure in the Gulf was hit, raising uncertainty over global energy security. Oil prices rose more than 2% to their highest levels in about a month, while shipping data showed only three ships passing through the crucial waterway on Thursday. "It affects Latin America primarily through two channels: global risk appetite and energy prices. If the conflict remains contained ... the region should be able to coexist with it," said Alejo Czerwonko, chief investment officer of EM at UBS Global Wealth Management. "In that scenario, global financial conditions would likely remain resilient while energy prices stay relatively elevated." Meanwhile, the Brazilian government authorized a nearly $2.6 billion credit package for the rural sector, which would be hit by Washington's latest 25% tariffs. It is also considering other retaliatory measures, including suspending patent protections for U.S. pharmaceutical products and agricultural seeds. The tariffs come ahead of Brazil's October election, for which the latest opinion polls show President Luiz Inacio Lula da Silva outpacing conservative Senator Flavio Bolsonaro. Equities in Brazil **.BVSP** gained 0.1%, while the Brazilian real **BRL=** weakened 0.2%. Separately, data showed economic activity in the region's largest economy grew slightly more than expected in May, reinforcing expectations of further rate cuts. Most equities in the region were hit by the risk-off momentum. Equities in Chile **.SPIPSA** dropped 1.3%, tracking falling prices of copper. Argentine stocks **.MERV** lost 1.1%, while equities in Colombia **.COLCAP** and Peru **.MXNUAMPESCPGPE** slipped 0.2% and 0.5%, respectively. Mexican stocks **.MXX** bucked the trend to gain 0.1%, and were also the only stocks among peers to log weekly gains. However, Czerwonko of UBS Global Wealth Management said equity markets in the region were still attractively valued and continued to be supported by earnings growth in several countries.

EMERGING MARKETS-LatAm stocks set for weekly fall as firmer dollar, Mideast tensions hurt sentiment

Currencies steady as dollar index holds

Risk-off mood weighs on Latin American assets

Brazil credit package and regional market moves

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