*
Brazil's Petrobras falls after quarterly results
*
Brazil's economy shrinks in Q4
*
Mexican President to launch plan to tame inflation
*
Latam FX down 0.3%, stocks off 0.8%
By Amruta Khandekar March 2 (Reuters) - Latin American stocks fell on Thursday while currencies also slipped against a strong dollar as U.S. Treasury yields stayed elevated on expectations that the Federal Reserve would keep tightening monetary policy for longer. MSCI's index for Latin American stocks dropped 0.8% by 1453 GMT with equities in Chile down 0.8%, while Brazil's Bovespa also edged lower. Shares of Brazil's state-run oil company Petrobras fell 2.6% after the firm on Wednesday posted upbeat quarterly earnings but proposed to trim its usually robust dividend, under pressure from the new leftist government. Currencies in the region also fell 0.3% giving up some gains from the previous day, with a fall in U.S. jobless claims adding to evidence of a strong economy which could keep the Fed firmly on an aggressive rate hiking path. "In the near term, we are expecting Latin American assets to be rangebound as markets further digest the fact that rates are going to be higher for longer in the U.S.," said Pedro Quintanilla Dieck, senior emerging markets strategist for UBS Global Wealth Management. "That being said, over the course of the year, we are fairly constructive. Around the second half (of the year), according to markets, the Fed will be pausing its rate hiking cycle and this coupled with the high carry in Latin American currencies will also be supportive." The Colombian peso fell 0.5% in light trading volumes on Thursday, leading declines among regional peers. The currency has fallen marginally this year after dropping nearly 16% against the greenback in 2022. The peso is poised to outperform other major emerging market currencies over the next few years, as elevated crude prices in 2024 support the oil exporter's trade and with monetary policy likely remaining restrictive for longer, Jonathan Peterson, senior markets economist at Capital Economics wrote in a note. The Brazilian real dipped 0.7% against the greenback, as data showed the country's economy shrank in the fourth quarter, affected by industry weakness, casting a shadow over the 2023 outlook amid higher borrowing costs. Mexico's peso also edged 0.3% lower. Mexican President Andres Manuel Lopez Obrador said on Thursday he will launch a plan to tame inflation with other Latin American governments. Chile's peso and the Peruvian sol slipped 0.5% and 0.2% respectively as copper prices retreated on a firmer dollar and the prospect or more U.S. sanctions on top metals consumer China. Key Latin American stock indexes and currencies at 1453 GMT:
Stock indexes Latest Daily % change MSCI Emerging Markets 979.46 -0.48 MSCI LatAm 2189.46 -0.86 Brazil Bovespa 103892.86 -0.47 Mexico IPC 53163.47 -0.58 Chile IPSA 5333.80 -0.77 Argentina MerVal 248661.25 -0.368 Colombia COLCAP 1203.45 0.38 Currencies Latest Daily % change Brazil real 5.2153 -0.47 Mexico peso 18.1404 -0.27 Chile peso 814.1 -0.52 Colombia peso 4844.72 -0.35 Peru sol 3.7772 -0.23 Argentina peso 197.8700 -0.15 (interbank) Argentina peso 371 1.08 (parallel) (Reporting by Amruta Khandekar; Editing by Sharon Singleton)
