Latam markets slip as commodity prices fall; Brazil GDP beats estimates
Brazil's economy expanded 1.4% in Q2 vs 0.9% estimate
Oil slumps 5%
Colombia's peso hits four-week low
Chile interest rate decision on deck
Latam stocks down 1.1%, FX 0.3%
Updated at 1930 GMT
By Shashwat Chauhan and Lisa Pauline Mattackal
Sept 3 (Reuters) -Currencies of resources-rich Latin American countries slid on Tuesday, as prices of commodities such as copper and crude oil came under pressure with most equity indexes clocking declines as well.
MSCI's index for Latin American currencies .MILA00000CUS slipped 0.3%, while a gauge for stocks .MILA00000PUS was down 1.1%.
Meanwhile, Brazil's real BRL= pared its initial gains to fall 0.5% against the dollar in volatile trading, tracking declining iron ore prices. IRONORE/
The fall was despite data showing the Brazilian economy surprised to the upside in the second quarter, increasing bets on an imminent interest rate hike to curb inflationary pressure, even as several brokerages hiked their expectations for economic growth this year.
"The economy looks set to expand by around 3% over this year as a whole, but this is above Brazil's potential rate and is going to add fuel to the debate about whether Copom will raise interest rates," said William Jackson, chief emerging markets economist at Capital Economics.
A roughly 5% fall in oil prices also weighed on regional currencies, as a report that a deal was imminent to resolve a dispute that has halted Libyan production and exports pushed crude prices to their lowest since around the beginning of the year. O/R
Additionally, worries about growth in China, and some profit-taking as U.S. manufacturing data pointed to continued subdued factory activity, weighed on the outlook for global demand.
Oil producer Colombia's peso COP= dropped 1% and Mexico's peso MXN= fell 0.2%, both touching a four-week low against the dollar.
Currencies of top copper producer Chile's peso CLP= and Peru's sol PEN= eased 1.3% and 0.5%, respectively, as prices of the red metal touched more than two-week lows. MET/L
Despite pointing to a weaker trend, most market participants did not see the U.S. data prompting a larger than expected rate cut from the Federal Reserve in September. Lower U.S. rates tend to benefit riskier and higher-yielding emerging market assets.
"Recent public comments of Fed officials indicate few currently see the need for a 50 bps reduction, we expect Friday's jobs report will likely need to come in weaker than July for such a large rate reduction to kick off the Fed easing cycle," Wells Fargo analysts said.
Friday's all-important August non-farm payrolls report that could offer more clues on the magnitude of September's expected rate cut.
Investors also eyed an ongoing debate about a controversial judicial reform in Mexico's Lower House of Congress.
Mexico's benchmark .MXX dropped 1.3% and Brazilian shares .BVSP dipped 0.3%, in tandem with a broad decline on Wall Street. .N
An interest rate decision in Chile is expected later today, with the central bank expected to ease benchmark rates to 5.50%.
Meanwhile, Brazil, the U.S. and other governments criticized an arrest warrant issued for Venezuelan opposition leader Edmundo Gonzalez.
HIGHLIGHTS
** Lebanon ex-central bank chief Riad Salameh arrested over financial crimes
** Mexico July seasonally adjusted jobless rate 2.7%
** South African economy gains momentum but not as much as forecast
**Ukraine's newly restructured bonds hold ground on first day of trade
Key Latin American stock indexes and currencies:
MSCI Emerging Markets .MSCIEF | 1090.16 | -0.56 |
MSCI LatAm .MILA00000PUS | 2209.56 | -1.12 |
Brazil Bovespa .BVSP | 134507.04 | -0.3 |
Mexico IPC .MXX | 51802.21 | -1.32 |
Chile IPSA .SPIPSA | 6380.05 | -1.18 |
Argentina Merval .MERV | 1750519.74 | -0.246 |
Colombia COLCAP .COLCAP | 1347.19 | -0.59 |
Currencies | Latest | Daily % change |
Brazil real BRL= | 5.6444 | -0.48 |
Mexico peso MXN= | 19.856 | -0.22 |
Chile peso CLP= | 928.67 | -1.26 |
Colombia peso COP= | 4186.33 | -1.03 |
Peru sol PEN= | 3.7721 | -0.5 |
Argentina peso (interbank) ARS=RASL | 953 | 0 |
Argentina peso (parallel) ARSB= | 1290 | 1.162790698 |
Reporting by Shashwat Chauhan and Lisa Mattackal in Bengaluru; Editing by Alex Richardson and Alistair Bell
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