June 25, 2019 / 7:57 PM / 4 months ago

EMERGING MARKETS-Brazil leads Latam assets lower after Fed comments

 (Updates prices)
    By Susan Mathew
    June 25 (Reuters) - Latin American currencies and stocks
slid on Tuesday, led by Brazil assets, after comments from the
U.S. Federal Reserve chief saw traders trim bets of a half-point
cut in U.S. interest rates in July.
    The dollar recovered from three month lows hit earlier in
the session, while U.S. stocks remained pressured. Most Latam
stock indexes tracked Wall Street amid already subdued sentiment
on Chinese-U.S. trade anxiety and rising tensions between the
United States and Iran.
    MSCI's index of regional currencies slipped
0.4% with Brazil's real down 0.7%, while its index of
Latam stocks lost 1.5%. Gains on the regional
MSCI indexes over recent weeks have been fueled by expectations
of more stimulus from both the Fed and the European Central
Bank. 
    Fed Chair Jerome Powell pushed back on pressure from
President Donald Trump to cut rates, saying that policymakers
were grappling with whether trade uncertainties and other issues
supporting interest rate cuts.
    Earlier, St. Louis Fed President James Bullard in an
interview with Bloomberg said he does not think the Fed needs to
cut rates by a half-percentage point at its next policy meeting,
in late July.
    Investors had broadly started to price in increasing chances
of a cut in the Fed's key rates next month. Lower U.S. interest
rate tend to boost the relative attractiveness of developing
world assets, usually spurring broad inflows into emerging
markets.
    Mexico's peso lost 0.1% and hit two-week lows. Mexico
City's IPC stock index edged higher.
    Mexico's central bank is expected to hold its benchmark
interest rate steady at 8.25% on Thursday, a Reuters poll
showed, after annual inflation slowed this month more than
expected.
   Brazil's real steepened losses, while the main stock
index slid 1.5% after four days of gains.
   Brazil's economy is stagnating and price pressures are
evolving "favorably," but uncertainty surrounding economic and
fiscal reforms is clouding the growth and inflation outlook,
minutes of the central bank's rate-setting committee, known as
Copom, showed.
    "Our impression is that the tone of the Copom minutes seeks
to cool a bit market expectations of a rate cut in July. Yet it
does keep the door open for policy easing at some point," wrote
Mauricio Oreng, a senior Brazil strategist at Rabobank. 
    Oreng said the first-round approval of an effective pension
reform in Congress's Lower House may be the "concrete progress"
in reforms that the bank reiterated as a condition to consider
rate cuts. He said that three rate cuts of 50 basis points from
September onwards could be expected. 
    The lower house vote on pension reform is expected to take
place before lawmakers break for recess on July 18, presidential
spokesman Otavio Rego Barros said on Tuesday.
    Argentine assets eked out gains, as did the Colombian peso
, which hit a two-month high.
    
    Key Latin American stock indexes and currencies at 1940 GMT:
    Stock indexes             Latest    Daily %
                                         change
 MSCI Emerging Markets         1044.67      -0.8
                                        
 MSCI LatAm                    2833.00     -1.54
                                        
 Brazil Bovespa              100206.98     -1.82
                                        
 Mexico IPC                   43791.35      0.11
                                        
 Chile IPSA                    5089.23     -0.03
                                        
 Argentina MerVal             40231.40       0.3
                                        
 Colombia IGBC                12675.15     -0.16
                                        
                                                
       Currencies             Latest    Daily %
                                         change
 Brazil real                    3.8507     -0.65
                                        
 Mexico peso                   19.2180     -0.13
                                        
 Chile peso                      680.8     -0.03
                                        
 Colombia peso                  3188.4      0.10
 Peru sol                        3.304     -0.09
                                        
 
 (Reporting by Susan Mathew in Bengaluru; Editing by Leslie
Adler)
  
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