Latam assets higher as U.S. data eases recession worries; Mexican peso jumps ahead of rate decision
Updated at 1515 GMT
Mexico inflation rises 5.57% in July
Rate decisions due from Mexico and Peru later in the day
Eletrobras, Embraer shares up after results
El Salvador bonds continue to gain
Latam stocks index up 0.7%, FX up 0.1%
By Lisa Pauline Mattackal
Aug 8 (Reuters) -Latin American stocks and currencies broadly jumped on Thursday as better-than-expected U.S. jobless claims data brought some optimism back to cautious markets, while Mexico's peso rose after inflation data strengthened the case for the Bank of Mexico to leave interest rates unchanged.
Data showing an improvement in U.S. jobless claims figures lifted hopes that worries about a slowdown in the world's largest economy were overstated after those concerns sparked a bout of market volatility that sharply hit riskier emerging market assets.
Latin American currencies were broadly up, with the dollar weakening between 0.3% and 0.7% against the Brazilian real BRL=, Colombian peso COP= and Chilean peso CLP=.
"The depreciation that a lot of these currencies have experienced actually represent some pretty attractive entry points," said Brendan McKenna, FX strategist at Wells Fargo, though adding emerging market currencies were likely to be somewhat volatile until the U.S. economic picture becomes more clear.
Argentina's benchmark stock index .MERV leapt 4.7%, leading broad gains in the region, and MSCI's Latin American stocks index .MILA00000PUS rose 0.7%. It outperformed the broader EM stocks gauge .MSCIEF, after a selloff in tech stocks hit Asian bourses earlier in the day.
Mexico' annual headline inflation jumped 5.57% in July to its highest level in over one year. The data was in line with forecasts, but will likely further complicate the decision facing its central bank as it balances limiting inflation with the need to stimulate growth.
Given rising inflation, most analysts polled by Reuters earlier in the week expected Banxico to hold interest rates at the conclusion of its policy meeting later on Thursday.
The Mexican peso MXN= jumped to 19.11 versus the dollar, continuing to recover after volatility in global markets and an unwinding of Japanese yen-funded carry trades.
"I think the Central Bank of Mexico is going to be on hold today and for the next couple of months, so the carry trade will still be somewhat attractive and can act as a mechanism for the peso to recover," McKennasaid.
A rate announcement in Peru is also on deck, with its central bank also expected to hold rates steady. The Peruvian sol PEN=PE was little changed.
On the company front, shares of planemaker Embraer EMBR3.SA jumped 7.6% after second-quarter net income jumped almost 40%, while shares of Brazil's largest power company Eletrobras ELET3.SA rose 3.5% after the company reported a nearly 8% rise in net profit.
El Salvador's sovereign bonds continued to rally after the International Monetary Fund said the two sides had made progress in talks, with the 2034 maturity SV020163232 gaining more than 1.6 cents on the dollar.
In Europe, Hungary's forint EURHUF= strengthened to 396.24 to the euro, snapping three sessions of declines after data showed inflation rose in July.
HIGHLIGHTS
** In deluge of protests, fuel subsidies prove hard to abolish
** BOJ's communication about-face may haunt future rate moves
** China's overseas investment funds relax purchase restrictions after global sell-off
Key Latin American stock indexes and currencies
MSCI Emerging Markets .MSCIEF | 1046.54 | -0.36 |
MSCI LatAm .MILA00000PUS | 2185.61 | 0.73 |
Brazil Bovespa .BVSP | 128448.74 | 0.73 |
Mexico IPC .MXX | 52918.32 | 0.45 |
Chile IPSA .SPIPSA | 6238.02 | 0.73 |
Argentina Merval .MERV | 1519738.86 | 4.654 |
Colombia COLCAP .COLCAP | 1309.29 | 0.96 |
Currencies | Latest | Daily % change |
Brazil real BRL= | 5.6143 | 0.35 |
Mexico peso MXN= | 19.1204 | 0.76 |
Chile peso CLP= | 936.7 | 0.65 |
Colombia peso COP= | 4101.75 | 0.72 |
Peru sol PEN= | 3.7217 | -0.02 |
Argentina peso (interbank) ARS=RASL | 936.5 | -0.053390283 |
Argentina peso (parallel) ARSB= | 1355 | 2.21402214 |
Reporting by Lisa Mattackal in Bengaluru; Editing by Alistair Bell
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