October 23, 2018 / 8:35 PM / a month ago

EMERGING MARKETS-LatAm stocks, FX recoup some of session's losses

    By Aaron Saldanha
    Oct 23 (Reuters) - Latin American stocks and currencies fell
on Tuesday, but clawed back much of the ground lost earlier in
the session, with the Mexican peso changing course to trade
higher, as recovering risk sentiment helped put the brakes on a
global selloff.
    MSCI's index of Latin American stocks
recovered from a 2.7 percent fall to a near two week-low to
trade 0.8 percent lower. Stocks on Wall Street cut their losses
and the Nasdaq briefly turned higher as investors bought back
beaten-down shares.
    The Mexican peso firmed 0.7 percent, recovering from
losses earlier in the session when it was swept up in the global
pullback as well as lingering concerns amid U.S. President
Donald Trump's threats about a United States-bound migrant
caravan from Central America. 
    "There is a recovery and Mexico is probably the best proxy
for that," said Sacha Tihanyi, deputy head of emerging markets
strategy at TD Securities.
    "It is correlated with that move ... all that risk sentiment
that hurt initially and then turned things around, which is
probably a good description of the factor at play today."
    Mexico's equity market also rebounded a bit from a
1.5 percent drop to a four-month low during the session to trade
1.1 percent lower.    
    Brazil's benchmark Bovespa index trimmed losses to
0.4 percent from a trough of as much as 1.8 percent.
    But Brazil's currency, the real traded weaker as
bullish momentum eroded ahead of Sunday's presidential election
runoff, with polls showing the market-favored far-right
candidate Jair Bolsonaro defeating leftist rival Fernando
Haddad.
    "There is a kind of pricing perfection - the markets are a
little too bulled up ... (and) prefer Bolsonaro, but he is by no
means a perfect candidate," said Win Thin, global head of
emerging market currency strategy at Brown Brothers Harriman.
    Despite firming broadly in recent weeks on the hope of
Bolsonaro taking office, the real has declined about 10.6
percent this year.
    Rabobank Senior Brazil Strategist Mauricio Oreng said his
models suggest 90 percent of that fall coming from external
drivers and that the recent "electoral/fiscal" premium has fully
eroded.
    Colombian stocks were 0.6 percent lower, after
recovering from a 1.3 percent fall to a one-week low earlier in
the session.
    Argentina's peso stabilized to trade about 0.4
percent lower. Traders had cited excess liquidity seeking
safe-haven dollars as the peso weakened in intraday trading by
as much as 2.6 percent. 
    "For peso stability, you're going to have to see broad
(emerging markets) and financial markets be much more calm,"
said TD Securities' Tihanyi.
    
 Key Latin American stock indexes and currencies at 2010 GMT:
    
 Stock indexes                 Latest          Daily   YTD pct
                                                 pct    change
                                              change  
 MSCI Emerging Markets              962.37     -2.08    -15.16
                                                      
 MSCI LatAm                       2,704.59     -0.75     -3.65
 Brazil Bovespa                  85,356.02     -0.28     11.72
 Mexico IPC                      46,457.45     -1.08     -5.87
 Chile IPSA                       5,114.17     -0.16     -0.16
 Argentina MerVal                28,302.80     -0.93     -5.86
 Colombia IGBC                   12,405.53     -0.64      9.10
                                                              
 Currencies                         Latest     Daily   YTD pct
                                                 pct    change
                                              change  
 Brazil real                        3.6954     -0.02    -10.34
 Mexico peso                       19.2861      0.63      2.14
 Chile peso                          684.2     -0.35    -10.17
 Colombia peso                       3,118     -1.11     -4.36
 Peru sol                            3.335     -0.09     -2.94
 Argentina peso (interbank)        36.5700     -0.25    -49.14
                                                      
 Argentina peso (parallel)           36.75     -0.68    -47.67
                                                      
 

 (Reporting by Aaron Saldanha in Bengaluru, editing by G Crosse)
  
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