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Fed seen raising rates by 25 basis points next week
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Argentina's inflation shoots past 100%
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Brazil's Natura & Co slides after soft Q4 results
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Brazil travel operator CVC falls on JPMorgan downgrade
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Latam currencies up 0.1%, stocks down 0.6%
(Updates prices; adds comments, details)
By Shreyashi Sanyal and Ankika Biswas
March 14 (Reuters) -
The Mexican peso on Tuesday was on track for its best single-day gain this year, leading the upward trend among Latin American currencies after U.S. inflation data assuaged concerns about an aggressive Federal Reserve interest rate hike next week.
The peso rose 1.7%, rebounding from a three-day sell-off that saw it fall 5% in the aftermath of the collapse of U.S. lenders Silicon Valley Bank (SVB) and Signature Bank. The slump was its worst in more than two years. Among its peers, Brazil's real , Chile's peso and the Colombian peso gained between 0.2% and 0.7%. The broader Latin American currencies index edged up 0.1%, set to snap a three-day losing streak during which it lost nearly 2.5%. U.S. consumer prices increased in February amid sticky rental housing costs, but were largely in line with expectations.
While economists are divided on whether rising inflation will be enough to push the Fed to hike rates again next week after the failure of two regional banks, traders' bets have now shifted to a 25-basis-point hike rather than the half-percentage-point increase seen before the recent banking crisis. The dollar edged 0.1% lower. "Emerging market currencies are strengthening as the US dollar has begun weakening as the market now expects a 25 basis point hike instead of 50," said Quincy Krosby, chief global strategist for LPL Financial. On the economic front, Peruvian mining exports dropped 19.8% on a year-on-year basis in January, in the wake of devastating protests that have rocked the country in recent months. While currencies regained steam on Tuesday, stocks in the region remained under pressure, with the broader MSCI Latam stocks gauge losing 0.6% and on track for its fourth consecutive sessions of losses.
"There is still concern over any reverberation from a potential contagion," Krosby added. Stocks in Sao Paulo lost 0.5%, with cosmetic maker Natura & Co plunging 18.4% after reporting a fourth-quarter net loss and lower revenues across all its business lines.
Brazilian travel operator CVC Brasil Operadora e Agencia de Viagens SA dropped 9.3% after JPMorgan downgraded the stock to "underweight" from "neutral." Benchmark stock indexes in Mexico , Chile and Argentina were down between 0.3% and 2.2%. Emerging markets in Europe will also be in focus this week as the European Central Bank gears up to deliver another hefty interest rate hike on Thursday. "We will have to wait for the global headlines, like what will happen in the U.S. and definitely what will the ECB do? Which will be the main driver for the EMEA region," said ING strategist Frantisek Taborsky. Elsewhere, Argentina's annual inflation rate shot past 100% in February, the first time it has reached triple digits since 1991 when the country was coming out of hyperinflation.
Key Latin American stock indexes and currencies at 1930 GMT:
Stock indexes Latest Daily %
change
MSCI Emerging Markets 946.55 -1.55 MSCI LatAm 2129.44 -0.57
Brazil Bovespa 102615.37 -0.49
Mexico IPC 52860.91 -0.29
Chile IPSA 5297.93 -0.73 Argentina MerVal 220358.62 -2.162
Colombia COLCAP 1153.34 -0.06 Currencies Latest Daily %
change
Brazil real 5.2562 0.22
Mexico peso 18.5903 1.68
Chile peso 801.5 0.45
Colombia peso 4733.5 0.73
Peru sol 3.7772 0.23
Argentina peso (interbank) 202.0900 -0.11 Argentina peso (parallel) 373 1.07 (Reporting by Shreyashi Sanyal in Bengaluru; Editing by
Alistair Bell and Paul Simao)
