LatAm assets mixed as elevated bond yields counter soft inflation; Fed hike odds fade
ILF•Latin American assets were mixed, with MSCI LatAm stocks up 1.1% and currencies gaining 0.5%, as softer-than-expected US inflation reduced near-term rate-hike bets. Traders priced a roughly 37% chance of an October Fed hike, down from about 45%.
1. US inflation eases hike bets
Latin American markets weighed elevated bond yields against softer US inflation data on Wednesday. August US inflation was 3.4% annually, below the 3.7% estimate, and traders reduced the priced-in chance of an October rate hike to roughly 37% from about 45%. The 10-year US Treasury yield continued gaining, last at 5.297%.
2. Regional markets diverge
MSCI's Latin American stock index advanced 1.1%, while its currency index gained 0.5%, set to end a six-day losing streak. Colombia's central bank unexpectedly raised its benchmark rate by 25 basis points to 12.25%; the peso rose 1.4%, while the stock index slipped 0.2%.
3. Brazil and Chile developments
Brazil's real strengthened 0.6% and its equities gained 1.6% ahead of the October 4 presidential election. China said it would impose an additional 55% tariff on Brazilian beef shipments from October 1 after Brazil reached its annual quota of 1.1 million metric tons. In Chile, unemployment reached a more-than-five-year high, and stocks fell 0.9% to their lowest in three months.
