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EMERGING MARKETS-Latam equities slide ahead of US CPI; investors parse Banxico governor’s comments

Nov 13 (Reuters) - Investors avoided riskier Latin American stocks and currencies on Monday ahead of a highly anticipated U.S. inflation reading, while Mexican shares came under pressure after comments by Banxico's governor.

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  • India’s Oct retail inflation eases to 4.87%
  • Brazil debuts ESG sovereign dollar bonds
  • Mexico cenbank governor does not see rate cuts this year
  • Latam stocks down 0.2%, FX steady

MSCI’s gauge for Latam stocks fell 0.2%, while a basket of regional currencies was little changed by 1515 GMT.

MSCI’s index tracking South American currencies ended the previous week in the red as hawkish commentary by U.S. Federal Reserve chair Jerome Powell sparked a selloff in global markets.

Investors are now waiting for the October U.S. consumer prices report due on Tuesday that could determine the outlook for U.S. monetary policy and the dollar.

Meanwhile, Mexico’s benchmark index dipped 0.2% and the peso was flat after Banxico governor Victoria Rodriguez was quoted as saying the central bank will start cutting interest rates when macro-economic conditions permit it, but its five-member board does not see that happening this year.

“In our forecasts for the peso, we see strengthening based on the fact that Mexico demonstrated economic resilience and even expansion in 2023,” said Juan Perez, director of trading at Monex.

“The confidence being exuded by central bank officials is merited as the country has successfully seen disinflation while incomes and activity have climbed.”

Brazil’s Bovespa slipped 0.5%, with shares of B3 sinking 4.1% after analysts at BTG Pactual downgraded their recommendation of the stock exchange operator to “Neutral” from “Buy”.

StoneCo surged 8.9% after the financial tech firm saw its adjusted quarterly earnings more than quadruple, off the back of solid growth in its financial services segment.

Separately, Brazil’s Treasury announced its inaugural issuance of sustainable sovereign bonds on the international market, maturing in 2031, aiming to reaffirm the government’s commitment to sustainable policies.

The country’s real dropped 0.5% after a central bank poll showed local private sector economists expect the country’s inflation to end 2023 at 4.59%, down from levels projected last week, sparking hopes for further interest rate cuts.

Top regional copper producer Peru’s sol added 0.3% as prices of the metal rose.

Colombia’s peso saw little action on what is a public holiday, with local markets closed.

Elsewhere in emerging markets, India’s rupee was steady after data showed retail inflation eased in October to a four month low, edging closer to the central bank’s target of 4%, which it has said needs to be firmly in sight before it can start lowering rates.

Turkey’s domestic sovereign bonds are set to be one of the top trades in emerging market fixed income next year, Deutsche Bank said in an outlook note.


Reporting by Johann M Cherian in Bengaluru; Editing by Kirsten Donovan

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