February 5, 2018 / 4:11 PM / a year ago

EMERGING MARKETS-LatAm stocks extend losses on U.S. inflation bets

    By Bruno Federowski
    SAO PAULO, Feb 5 (Reuters) - Latin American stocks fell on
Monday as fears of resurgent inflation in the United States
weighed on demand for emerging market assets.
    The move came on the heels of sharp losses on Friday, after
data showed the largest U.S. wage growth since 2009 fueling
expectations of faster interest rate hikes this year.
    The report drove profit-taking on high-yielding assets,
which had rallied since the beginning of the year on an outlook
of strong global economic growth.
    "Friday's data has caused concern in equity markets, which
have rapidly taken back a lot of January's gains, but less of a
'risk-off' reaction from FX markets, so far," analysts at Lloyds
Bank wrote in a report.
    "We are now near fully pricing in three hikes this year and
rising speculation of four." 
    MSCI's emerging market index fell 1.2 percent,
capping the biggest two-day decline since May.
    Losses in Latin America were less extreme, with MSCI's
regional index down 0.2 percent. Still,
Argentina's benchmark Merval stock index tumbled 3
percent to a one-month low, extending a year-long trend of sharp
    Brazil's benchmark Bovespa stock index was nearly
flat, supported by rising shares of miner Vale SA in
the wake of higher iron ore prices. 
    Shares of blue-chip banks Itaú Unibanco Holding SA
 and Banco Bradesco SA turned higher,
erasing earlier losses, as traders continued to ponder the
likelihood the government would pass a key plan to cut social
security spending.
    A cabinet minister said on Monday the government was still
40 votes short of the 308 needed to approve the unpopular bill
in the lower house of Congress. Investors see the measure as key
to boosting long-term growth.
    Nevertheless, the official said he was confident the bill
would be approved this month as 80 to 100 lawmakers have not yet
made up their minds.
    Key Latin American stock indexes and currencies at 1720 GMT:
 Stock indexes                                 daily %   YTD %
                                    Latest      change  change
 MSCI Emerging Markets                1216.24    -1.19    6.25
 MSCI LatAm                           3132.11    -0.22   10.99
 Brazil Bovespa                      84184.95     0.17   10.19
 Mexico IPC                          50395.83    -0.39    2.11
 Chile IPSA                           5802.26    -0.41    4.27
 Chile IGPA                          29194.12    -0.34    4.34
 Argentina MerVal                    31647.06    -2.97    5.26
 Colombia IGBC                       12016.92    -1.06    5.68
 Currencies                                    daily %   YTD %
                                                change  change
 Brazil real                           3.2365    -0.70    2.37
 Mexico peso                          18.5745     0.12    6.05
 Chile peso                            601.89     0.12    2.12
 Colombia peso                         2833.7     0.19    5.23
 Peru sol                                3.22    -0.06    0.53
 Argentina peso (interbank)           19.5000    -0.03   -4.62
 Argentina peso (parallel)              19.93    -0.05   -3.51
 (Reporting by Bruno Federowski; Editing by Jeffrey Benkoe)
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