Latam FX, stocks lose ground as China stimulus optimism tapers off
Survey shows Mexico likely to cut interest rate to 10.50%
Brazil's inflation undershoots all estimates
Chile expected to cut rate by 25 bps in October, poll says
Latam FX down 0.6%, stocks down 1.2%
Updated at 3:35 p.m. ET/ 1935 GMT
By Ankika Biswas and Shashwat Chauhan
Sept 25 (Reuters) -Most Latin American stocks and currencies retreated on Wednesday, a day after logging strong gains when top commodities consumer China unveiled stimulus to aid its ailing economy, with the Mexican peso the worst performer.
Mexico's peso MXN= dropped 1.7% against the dollar to two-week lows, leading the MSCI index for Latam currencies .MILA00000CUS 0.6% down after a 1% jump on Tuesday following China's stimulus measures that sparked a rally in oil and metal prices.
"For sure, it provides a welcome short-term boost to confidence and supports asset prices," wrote Guillaume Tresca, senior EM strategist at Generali Asset Management.
"Yet the package does not look strong enough to turn around the Chinese economy and the property market."
Investors are awaiting Mexico's policy decision on Thursday and expectanother interest rate cut, according to nearly all analysts surveyed in a Reuters poll, as inflation slows and the Federal Reserve already approved an aggressive rate cut.
Colombia's peso COP= hit a one-week low, driven by an over2% fall in oil prices that also weighed on Mexico's peso. Colombia's central bank policy decision is also due next week.
Further, economic committees in Colombia's Congress on Tuesday rejected the government's proposed budget for 2025 amid fierce debate over its $126 billion value, but the government could push it through by decree.
Brazil's real BRL= also weakened 0.4% after data showed inflation slowed much more than expected in its mid-September reading, in the first CPI figures released since the country's central bank decided to embark on a monetary tightening cycle.
The largest Latam country also recorded a wider-than-expected current account deficit in August, as trade surplus more than halved from a year earlier and the services account deficit deepened.
Meanwhile, a poll showed Chile is expected to lower its benchmark interest rate by 25 basis points from the current 5.50%.
The Chilean peso CLP= reversed initial gains to fall 0.3%, while's Peru's sol PEN= held steady at 3.7433 per dollar.
Equities in the region also lost ground, with most local bourses trading lower and MSCI's index for stocks .MILA00000PUS down 1.2%.
In Argentina, data showed economic activity fell 1.3% in July from a year earlier, compared to a 3.9% contraction expected by analysts surveyed by Reuters.
Elsewhere, Czech Republic cut its rates by 25 basis points as expected, maintaining a slowed-down pace of easing as inflation hangs near target, the crown holds steady and the economy slowly recovers. The central bank, however, stated its board does not have any commitment on continued rate cuts.
HIGHLIGHTS:
** Czech government approves higher budget deficit targets after floods
** UAE c.bank sees 4% GDP growth in 2024, state news agency reports
Key Latin American stock indexes and currencies:
Equities | Latest | Daily % change |
MSCI Emerging Markets .MSCIEF | 1134.98 | 0.26 |
MSCI LatAm .MILA00000PUS | 2241.51 | -1.21 |
Brazil Bovespa .BVSP | 131596.49 | -0.42 |
Mexico IPC .MXX | 53196.33 | -0.85 |
Chile IPSA .SPIPSA | 6440.39 | -0.15 |
Argentina Merval .MERV | 1745133.82 | -1.664 |
Colombia COLCAP .COLCAP | 1315.75 | -1.43 |
Currencies | Latest | Daily % change |
Brazil real BRL= | 5.4772 | -0.41 |
Mexico peso MXN= | 19.6322 | -1.69 |
Chile peso CLP= | 912.9 | -0.27 |
Colombia peso COP= | 4204.6 | -1.23 |
Peru sol PEN= | 3.7433 | 0.13 |
Argentina peso (interbank) ARS=RASL | 968 | -0.258264463 |
Argentina peso (parallel) ARSB= | 1220 | 2.049180328 |
Reporting by Ankika Biswas and Shashwat Chauhan in Bengaluru; Editing by Nick Zieminski and Lisa Shumaker
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