October 3, 2019 / 6:32 PM / a month ago

EMERGING MARKETS-Latam FX firm as weak U.S. data dents dollar

 (Updates prices)
    By Agamoni Ghosh and Susan Mathew
    Oct 3 (Reuters) - Latin American currencies rallied on
Thursday as a weak reading of service sector activity in the
United States raised doubts about the health of the world's
largest economy and dented the dollar.  
    U.S. services sector growth slowed to its most anemic pace
in three years last month, and job growth in the largest slice
of the American economy was the weakest in half a decade, a
survey of purchasing managers showed.    
    An index of Latin American currencies jumped
1.6% and was on track to post its best day in eight months with
gains in regional currencies ranging between 0.5% and 1.4%. The
dollar index which measure the greenback against a basket
of six major rivals was down 0.2%.
    "We know manufacturing in the U.S. is already in recession,
now we have to see if services follow suit," said Christian
Lawrence, senior market strategist, LatAm FX at Rabobank. 
    "For Latam currencies, the move is a short-term reaction to
the dollar's weakness and expect it to fade."
    Brazil's real firmed 1.3% and touched its highest in
two weeks bolstered by the latest reading of service sector
activity in Latin America's largest economy showing an expansion
in September at the fastest pace in six months.
    Investors will now be closely monitoring progress related to
a landmark pension reform bill, whose final vote of approval
from the Senate is expected to be completed by later this month.

    "It's not a done deal yet so that is a lingering risk, but
the market is pretty much pricing in a passage, so any sign of
delay or hindrance to that could result in a huge sell-off,"
said Lawrence.   
    Stocks in Sao-Paulo slipped slightly.
    Lender BTG Pactual was the worst performer on
Brazil's main index after Brazilian prosecutors said they were
investigating BTG and former central bank and finance ministry
officials over the alleged illegal leaking of interest rate
decisions between 2010 and 2012..  
    State-controlled Banco do Brasil was the biggest
boost to the index after it announced a 5.75 billion real ($1.39
billion) secondary share offering.
    Miner Vale SA followed, up 1%, after it said it
expects to finish paying for most of the expenses related to the
disaster at one of its facilities that killed at least 250
people by 2021.   
    Mexican and Colombian stocks gained around
half a percent each, tracking a move higher on Wall Street as
the weak U.S. data raised bets of more easing from the U.S.
Federal Reserve.
    Stocks in Chile and Argentina slipped, with the
latter breaking a four-day winning streak. 
    
  Latin American stock indexes and currencies at 1815 GMT:
    
    Stock indexes             Latest    Daily %
                                         change
 MSCI Emerging Markets          992.62      0.35
                                        
 MSCI LatAm                    2630.79      1.47
                                        
 Brazil Bovespa              100823.00     -0.21
                                        
 Mexico IPC                   42420.22      0.47
                                        
 Chile IPSA                    5000.10     -0.43
                                        
 Argentina MerVal             30468.10    -1.052
                                        
 Colombia IGBC                12866.92      0.69
                                        
                                                
       Currencies             Latest    Daily %
                                         change
 Brazil real                    4.0764      1.37
                                        
 Mexico peso                   19.6620      0.67
                                        
 Chile peso                      716.4      1.03
                                        
 Colombia peso                 3445.25      1.38
 Peru sol                       3.3698      0.54
                                        
 Argentina peso                57.7300      0.17
 (interbank)                            
                                        
 
 (Reporting by Susan Mathew in Bengaluru;
Editing by Marguerita Choy)
  
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