Latam assets drop on fiscal policy, interest rates caution
Updated at 1506 GMT
Mexico gross fixed investment rises in April
Brazil's Haddad rules out currency transaction tax
Kenyan assets in focus as protests intensify
Latam stocks off 0.5%, FX down 0.3%
By Johann M Cherian
July 2 (Reuters) -Concern around fiscal stability and interest rates dominated markets across Latin America on Tuesday, with most equities and currencies trading flat to lower in the region.
MSCI's index tracking Latin American currencies .MILA00000CUS slipped 0.5% to an eight month low against the dollar as markets focused on comments by Federal Reserve Jerome Powell that cautioned against an imminent reduction of U.S. interest rates.
As the most influential central bank in the world, the Fed's policy trajectory often sets the tone for monetary policy for most central banks across the world.
Brazil's real BRL= slipped 0.2% in choppy trading, hovering at 5.66 to the dollar, levels last seen in early 2022, as markets assessed comments by Finance Minister Fernando Haddad that there is no possibility the government would apply a financial transactions tax (IOF) on currency exchanges.
The real has lost over 14% year to date in value and is the worst performer among regional economies, as market participants weigh local fiscal policies and the future of monetary policy as highlighted by local central bank chief Roberto Campos Neto at a European Central Bank Forum in Portugal.
"Valuations have been doing well for several months, especially in the local currency place space and a lot of people are realizing that fiscal stresses are more real than they thought, and so you're seeing a little bit of a blowout in the currencies of Brazil, Mexico and Colombia," said Eduardo Ordonez Bueso, EM debt portfolio manager at BankInvest.
Separately, data showed consumer prices in Sao Paulo, Brazil's most populous city, rose 0.26 in June, from an increase of 0.09 in May. The data is an early indicator of inflation in the broader economy.
On the flip side, oil exporter Mexico's peso MXN= gained 0.8% to hit a one week high as crude prices hit two-month highs. O/R
Copper producer Chile's peso CLP= firmed 0.2% and Peru's sol PEN= added 0.7% as prices of the red metal added shine. MET/L
Colombia's peso COP= however, traded not far from the flat mark.
On the equities front, MSCI's index tracking regional bourses .MILA00000PUS slipped 0.3%, though heavy-weight Brazilian stocks .BVSP were up 0.3%.
Mexico's main stock index MXN= was flat, with market participants parsing April gross fixed investment in the country that increased 1.2% on a monthly basis, up from 0.9% in the month before.
Colombia's Colcap .COLCAP inched up 0.1%, while bourses in Chile .SPIPSA and Peru .SPBLPGPT slipped 0.4% each.
Elsewhere in emerging markets, yield on Kenya's shilling KES= was little changed as riots intensified in the east African country, signaling that President William Ruto had failed to appease protesters, despite having abandoned plans for tax rises last week.
Key Latin American stock indexes and currencies:
Latin American market prices from Reuters | ||
Stock indexes | Latest | Daily % change |
MSCI Emerging Markets .MSCIEF | 1080.48 | -0.63 |
MSCI LatAm .MILA00000PUS | 2168.61 | -0.51 |
Brazil Bovespa .BVSP | 124964.54 | 0.2 |
Mexico IPC .MXX | 52873.35 | -0.02 |
Chile IPSA .SPIPSA | 6372.84 | -0.53 |
Argentina MerVal .MERV | 1635554.51 | 2.56 |
Colombia COLCAP .COLCAP | 1382.68 | 0.13 |
Currencies | Latest | Daily % change |
Brazil real BRBY | 5.6670 | -0.24 |
Mexico peso MXN=D2 | 18.2396 | 0.53 |
Chile peso CLP=CL | 947 | -0.05 |
Colombia peso COP= | 4132.96 | 0.00 |
Peru sol PEN=PE | 3.825 | 0.01 |
Argentina peso (interbank) ARS=RASL | 914.0000 | 0.00 |
Argentina peso (parallel) ARSB= | 1400 | 0.36 |
Reporting by Johann M Cherian in Bengaluru; editing by Philippa Fletcher
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