Latam markets slide as US data mires bets on size of Fed policy easing
Chile's consumer prices up 0.3% in August
EM stocks see inflows in week to Wednesday - BofA
Latam stocks index down 1.5%, FX adds 0.1%
Updated at 1950 GMT
By Shashwat Chauhan and Lisa Pauline Mattackal
Sept 6 (Reuters) -Latin American currencies and stocks fell broadly on Friday, as the latest U.S. jobs report prompted investors to dial back expectations for a larger-than-usual interest rate cut by the Federal Reserve this month.
The jobs report, the week's big-ticket event, showed employment increased less than expected in August, but a drop in the jobless rate to 4.2% suggested an orderly labor market slowdown continued.
The dollar strengthened between 0.3% and 0.7% against the Mexican peso MXN=, Brazilian real BRL= and Colombian peso COP=.
Stock indexes across Latin America fell, with benchmark bourses in Brazil .BVSP, Mexico .MXX, Colombia .COLCAP, and Argentina .MERV losing between 0.9 and 2.7% on the day.
Traders cut back bets on a 50 basis point cut after the data, currently seeing a 69% chance of the Fed opting for a 25-basis-point cut when it meets later this month, according to the CME FedWatch Tool.
"The U.S. labor market is clearly cooler, but most indicators still show an economy operating at trend or higher; it makes sense for the Fed to start removing policy restraint, but we see little need to panic," said Lars Mouland, chief credit and rates strategist at Nordea Markets.
Chile's peso CLP= and Peru's sol PEN=PE both dipped 0.2% as prices of top export copper slid on global demand worries.
Consumer prices in Chile rose 0.3%, slightly more than expected, in August, data showed.
Emerging markets have struggled this week as continued concerns about slowing growth in the U.S. and China, the world's two largest economies, have compounded pressure on risk assets.
All Latin American stock indexes were set for weekly declines, with Chilean stocks .SPIPSA notching their worst week since April 2023 with a 3.2% loss.
A gauge tracking the region's biggest stocks .MILA00000PUS slipped 1.5%, set for its third straight weekly loss, while MSCI's index of global emerging market stocks .MSCIEF lost 2.5% for the week, its worst week since mid-July.
The impact of "higher-for-longer" U.S. rates as been particularly tricky for many Latin American central banks, which have had to grapple with depreciating currencies and consistent inflationary pressures amid signs of slowing growth.
"Central banks are still very unsure where the right level of interest rates are for the post-pandemic economy, but with the recent episode of much too high inflation still fresh in mind, they will approach that level cautiously," Nordea Markets' Mouland said.
Still, emerging market equities saw inflows for the 14th straight week in the week to Wednesday, while debt saw outflows for the sixth straight week, according to a report by Bank of America.
Mexico's currency was set for its third straight weekly loss, briefly weakening past 20 per dollar, after the lower house of Congress approved an overhaul of the country's judiciary.
MSCI's index for Latin American currencies .MILA00000CUS edged up 0.1% on the day, heading for a mild weekly gain of about 0.2%.
HIGHLIGHTS
** Colombia reaches deal with truckers to suspend road blockades
** Brazil's Eneva advances with purchase of power assets, share issue
Key Latin American stock indexes and currencies:
MSCI Emerging Markets .MSCIEF | 1072.88 | -0.3 |
MSCI LatAm .MILA00000PUS | 2191.48 | -1.51 |
Brazil Bovespa .BVSP | 134677.56 | -1.34 |
Mexico IPC .MXX | 51069.83 | -1.15 |
Chile IPSA .SPIPSA | 6246.34 | -1.81 |
Argentina Merval .MERV | 1717299.93 | -2.728 |
Colombia COLCAP .COLCAP | 1329.16 | -0.93 |
Currencies | Latest | Daily % change |
Brazil real BRL= | 5.5891 | -0.27 |
Mexico peso MXN= | 19.992 | -0.66 |
Chile peso CLP= | 943.99 | -0.18 |
Colombia peso COP= | 4172.89 | -0.41 |
Peru sol PEN= | 3.7841 | -0.23 |
Argentina peso (interbank) ARS=RASL | 956 | -0.209205021 |
Argentina peso (parallel) ARSB= | 1240 | 2.016129032 |
Reporting by Shashwat Chauhan and Lisa Mattackal in Bengaluru; Editing by Andrew Heavens and Jonathan Oatis
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