August 10, 2017 / 5:55 PM / 9 days ago

EMERGING MARKETS-LatAm currencies flat as U.S. data offsets N.Korea tensions

    By Bruno Federowski
    SAO PAULO, Aug 10 (Reuters) - Latin American currencies
treaded water on Thursday as bets that U.S. interest rates will
take longer to rise offset mounting geopolitical tensions
surrounding North Korea.
    An unexpected drop in U.S. producer prices in July was the
latest economic report to raise doubts over the Federal
Reserve's plans to hike rates once again this year.
    Although economic growth has shown signs of accelerating,
subdued price pressures have kept the U.S. central bank on a
cautious stance. Signs that President Donald Trump may fall
short on promises to raise spending and cut taxes have also cast
a shadow on hopes of a sharp pickup in economic activity.
    A slower path of interest rate hikes in the world's No. 1
economy could support demand for high-yielding assets. On
Thursday, those expectations counteracted lingering risk
aversion that drove a selloff in emerging markets the day
before.
    The currencies of Chile, Mexico, Brazil and Colombia were
nearly flat. They had weakened on Wednesday after North Korea
said it was "carefully examining" plans for a missile strike on
the U.S. Pacific territory of Guam just hours after Trump said
any threat to the United States would be met with "fire and
fury."
    The investor mood remained sour in stock markets, however,
with nearly all bourses in the region trading lower.
    Brazil's benchmark Bovespa stock index dropped 1.2
percent as expectations grew that the government would have to
aim for a wider budget deficit in 2017 and 2018, dealing a blow
to investors' hopes of increased austerity.
    "It is clear now that markets had been overly optimistic and
that fixing Brazil's fiscal issues will take a lot longer than
expected," a portfolio manager at a major investment bank said. 
    Ultrapar Participações SA shares tumbled to a
five-month low after the gas distribution company reported a 33
percent drop in second-quarter net profit and Credit Suisse
Securities analysts lowered their recommendation on the stock.
    Weaker-than-expected earnings reports also weighed on shares
of logistics operator Rumo SA and wireless carrier Oi
SA.
    Shares of Banco do Brasil SA, however, were a
rare bright spot, rising 0.5 percent in a sign of investor trust
in Chief Executive Officer Paulo Caffarelli's strategy for
turning around the state-controlled lender.
    
    Key Latin American stock indexes and currencies at 1730 GMT:
 Stock indexes                    Latest        Daily  YTD pct
                                                  pct   change
                                               change  
 MSCI Emerging Markets              1,055.34    -1.27    23.97
 MSCI LatAm                         2,746.61    -1.31     18.9
 Brazil Bovespa                    66,850.81    -1.21    11.00
 Mexico S&P/BVM IPC                50,703.46    -1.04    11.09
 Chile IPSA                         5,060.44    -0.51    21.90
 Chile IGPA                        25,246.31    -0.46    21.76
 Argentina MerVal                  21,178.99     1.21    25.19
 Colombia IGBC                     10,755.48     -0.9     6.19
 Venezuela IBC                    183,275.56     -0.5   478.06
                                                              
 Currencies                           Latest    Daily  YTD pct
                                                  pct   change
                                               change  
 Brazil real                          3.1572    -0.18     2.91
 Mexico peso                         17.9350     0.03    15.66
 Chile peso                            647.8     0.03     3.54
 Colombia peso                       2,996.8     0.14     0.16
 Peru sol                              3.249    -0.03     5.08
 Argentina peso (interbank)          17.7350    -0.20   -10.49
                                                       
 Argentina peso (parallel)             18.38     0.16    -8.49
                                                       
 
 (Reporting by Bruno Federowski; Editing by Lisa Von Ahn)
  

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