Latam markets slip ahead of rate-decision packed week; Venezuela bonds fall
Removes reference to Peruvian sol
Bovespa leads Latam stocks lower
Oil slips in choppy trading after Golan Heights attack
Rate decisions in Chile, Brazil, Colombia this week
Ethiopia floats currency
By Lisa Pauline Mattackal
July 29 (Reuters) -Latin American stocks and currencies slipped on Monday as investors assessed geopolitical risks ahead of a week packed with key central bank policy decisions, while Venezuelan bonds fell after the results of its presidential election were hotly contested.
MSCI's index tracking Latam stocks fell 1.1% to a nearly four-week low, while an index of regional currencies lost 0.5% as a stronger U.S. dollar =USD also pressured local assets.
Trading was cautious ahead of a raft of central bank decisions this week, with the Federal Reserve and Bank of Japan the most closely watched.
Further weighing on sentiment, worries increased over escalating conflict in the Middle East after a rocket strike in the Israeli-occupied Golan Heights.
Venezuela was in focus as both President Nicolas Maduro and opposition rival Edmundo Gonzalez claimed victory in its presidential election, with several countries both regionally and internationally questioning the results.
Venezuela's sovereign bonds fell, with the 2038 maturity USP97475AJ9=1M down 1.75 cents, while state oil firm PDVSA's 2022 bond USP7807HAM7=1M fell as much as 1.6 cents.
The Fed is widely expected to keep rates on hold at its meeting this week, with all focus on whether policymakers signal they could start easing policy in September, while the BOJ will be watched for a potential rate hike and any further changes to its bond-buying program.
"Latin American central banks certainly would welcome a dovish surprise from the Fed," said Geoff Yu, macro strategist at BNY Mellon.
"If the Fed does lean toward a dovish interpretation and this is subsequently complemented by resilient monetary policy postures across Latin America, there is scope for Latin American currency flows to recover."
Emerging markets have struggled over the past year as interest rates in economies such as the U.S. have dimmed the relative appeal of higher yielding but riskier EM assets, particularly in Latin America where policymakers across the region have eased policy to stimulate economic growth.
Regionally, rate decisions from the central banks of Colombia, Brazil and Chile are also due this week.
Chile's peso CLP=CL was down 0.5% against the dollar ahead of Tuesday's rate decision, where analysts expect the central bank to ease policy by 25 basis points.
Brazil's state-run oil firm Petrobras PETR4.SA lost 3% as oil prices reversed early gains, while Colombia's Ecopetrol ECO.CN dipped 0.9%.
Brazil's finance ministry official Guilherme Mello told Reuters that economic uncertainties still prevented a rate cut. Brazil's real BRBY was little changed on the day.
Elsewhere, Ethiopia's birr sank around 30% against the dollar after the central bank floated its currency, in hopes the move would increase chances of support for its struggling economy from the International Monetary Fund (IMF) and enable progress on debt restructuring.
HIGHLIGHTS:
** Poll: Global economy's growing resilience at odds with rate cut expectations
** Ratings agency Fitch upgrades Pakistan's credit rating
** EXCLUSIVE-Union at BHP's Escondida mine urges rejection of contract offer, strike possible
Key Latin American stock indexes and currencies at 1530 GMT:
Latest | Daily % change | |
MSCI Emerging Markets .MSCIEF | 1076.72 | 0.41 |
MSCI LatAm .MILA00000PUS | 2172.59 | -1.09 |
Brazil Bovespa .BVSP | 126780.49 | -0.56 |
Mexico IPC .MXX | 52832.39 | 0.02 |
Chile IPSA .SPIPSA | 6427.47 | -0.08 |
Argentina MerVal .MERV | 1516215.33 | -1.674 |
Colombia COLCAP .COLCAP | 1342.97 | -0.2 |
Currencies | Latest | Daily % change |
Brazil real BRBY | 5.6628 | -0.09 |
Mexico peso MXN=D2 | 18.6747 | -1.20 |
Chile peso CLP=CL | 956.5 | -0.52 |
Colombia peso COP= | 4067.77 | -1.21 |
Argentina peso (interbank) ARS=RASL | 930.5000 | -0.11 |
Argentina peso (parallel) ARSB= | 1400 | 2.50 |
Ethiopia's distressed debt https://reut.rs/4fnIfp5
Caracas claw back https://reut.rs/46ng45C
Reporting by Lisa Mattackal in Bengaluru; Editing by Alex Richardson
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