Latam stocks, FX slide as hot US inflation data lifts dollar, Treasury yields
SPY•Most Latin American stocks and currencies fell after hotter-than-expected September US inflation lifted the dollar and Treasury yields. MSCI’s Latin American stock gauge dropped 1.6% and its currency index fell 0.7%, both reaching more than one-week lows intraday.
1. Inflation pressures markets
Most Latin American stocks and currencies fell on Wednesday after US inflation rose faster than expected in September, strengthening bets that the Federal Reserve could raise rates again this month. The dollar index gained 0.7%, while the 10-year Treasury yield rose 6.6 basis points to 5.283%.
2. Brazil leads declines
MSCI’s Latin American stock gauge fell 1.6% and its regional currency index lost 0.7%, with both touching their lowest levels in more than a week intraday. Brazil’s Bovespa fell 0.9% and the real slipped 0.3%; August services activity contracted 0.1% from July. Brazil also said it would send Congress a bill to forgive micro-entrepreneurs’ government debt, addressing about 12.6 billion reais ($2.51 billion). Citi analysts said the administration’s measures could potentially damage the fiscal outlook in coming years.
3. Regional developments
An IMF official said Argentina needs to overhaul its tax system, including removing value-added tax exemptions. Argentina’s stock index fell 0.7%, while its currency was little changed. Outside Latin America, Uganda’s central bank raised its main rate by 2.25 percentage points to 12.0% to support the shilling, which rose more than 4% after the decision.
