Latam FX, stocks tick up after Fed Chair Powell strongly signals rate cut
Fed's Powell says 'time has come' to cut rates
Argentina's Milei to veto pension reform
Venezuela opposition leader to be called to testify
Latam stocks up 1.9%, FX adds 1.4%
Updated at 3:10 p.m. ET/ 1910 GMT
By Shashwat Chauhan and Shubham Batra
Aug 23 (Reuters) -Most Latin American stocks and currencies jumped on Friday, as investors favored risky assets after Federal Reserve Chair Jerome Powell offered an explicit endorsement of interest rate cuts, with the Mexican peso and Brazil's real outperforming.
Fed's Powell said "the time has come" for the U.S. central bank to cut interest rates as rising risks to the job market left no room for further weakness and inflation was in reach of the Fed's 2% target.
"Powell's speech in Jackson Hole seems to be accretive for gold, copper and risk assets generally," analysts at TD Securities wrote in a note.
Traders expect a quarter-point rate cut in September, but increased bets for a bigger cut after Powell's remarks. Fed funds futures are now pricing in a 34.5% chance of a 50-bp cut next month, up from about 25% late on Thursday.
"He has omitted references to a gradual approach, which implies 50 bps cuts are a possibility."
Possibilities of incoming rate cuts pushed the dollar =USD to its lowest level so far this year.
The Mexican peso MXN= appreciated 2.4% against the dollar after falling for the last four sessions, while Brazil's real BRL= added 1.9% after declining for the last three.
The Mexican peso was also on track to record its best day since June 2020.
Among other currencies, the Chilean peso CLP= and Colombian peso COP= rose over 1% each against the greenback, while the Peruvian sol PEN= bucked the trend to fall 0.2% in light trading.
Lower interest rates in the United States benefit high-yielding Latin American currencies, as the wide rate differential makes them attractive for currency "carry" trades.
Prices of commodities like copper and crude oil also perked up post Powell's comments, a positive for the region as commodities remain one of the top exports for countries such as Chile and Colombia.
On the equities front, Argentina's Merval index .MERV led the gains for regional bourses with an over 1% increase, followed by Brazil's Bovespa .BVSP, which rose 0.7%.
MSCI's gauge for Latin American equities .MILA00000PUS advanced 1.9% and the gauge for region's currencies .MILA00000CUS rose 1.4%. Both the indexes, however, were set to clock weekly losses.
Argentine President Javier Milei will veto a pension reform passed on Thursday by the Senate in a move that is likely to widen an ongoing rift between the libertarian president and the opposition-controlled Congress.
Emerging market equities received $4.7 billion in their 12th straight week of inflows, the longest streak since February 2024 in the week to Wednesday, according to Bank of America said.
HIGHLIGHTS
** Mexican president dismisses critique of judicial reform bill as interventionist, disrespectful
**Mexico to wait on Venezuelan voting tallies before taking stance on election, says president
**Brazil's Samarco expects to reach 60% of output capacity by year-end
Key Latin American stock indexes and currencies:
Equities | Latest | Daily % change |
MSCI Emerging Markets .MSCIEF | 1104.41 | 0.31 |
MSCI LatAm .MILA00000PUS | 2306.53 | 1.95 |
Brazil Bovespa .BVSP | 136098.06 | 0.68 |
Mexico IPC .MXX | 53632.82 | 0.59 |
Chile IPSA .SPIPSA | 6478.51 | 0.03 |
Argentina Merval .MERV | 1596908.51 | 1.235 |
Colombia COLCAP .COLCAP | 1333.6 | -0.1 |
Currencies | Latest | Daily % change |
Brazil real BRL= | 5.4785 | 1.88 |
Mexico peso MXN= | 19.0571 | 2.35 |
Chile peso CLP= | 909.2 | 1.05 |
Colombia peso COP= | 4025.77 | 1.14 |
Peru sol PEN= | 3.7365 | -0.22 |
Argentina peso (interbank) ARS=RASL | 945.5 | 0 |
Argentina peso (parallel) ARSB= | 1330 | 1.503759398 |
Reporting by Shubham Batra and Shashwat Chauhan in Bengaluru; Editing by Ana Nicolaci da Costa and Aurora Ellis
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