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Brazil's Lula to announce fiscal framework after China visit
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Ecuador declares emergency in provinces hit by earthquake,
rains
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Latam FX up 0.4%, stocks add 1.2%
(Updates throughout; adds comment)
By Shreyashi Sanyal and Bansari Mayur Kamdar
March 21 (Reuters) - Most Latin American currencies rose
on Tuesday as recent banking turmoil lifted hopes that the
Federal Reserve could soon end its rate-hiking cycle, while
Brazil's real lagged as an announcement of new fiscal rules was
delayed.
The U.S. dollar index was flat, lifting many emerging market currencies as risk sentiment rose on expectations the Fed will hike its benchmark lending rate by a smaller 25 basis points at the end of a two-day policy meeting on Wednesday. "From a global markets perspective, developments around the stability of U.S. regional banks may continue to result in sharp intraday action in Latam," said Juan Manuel Herrera, senior strategist at Scotiabank. The real slipped 0.1% as investors were left frustrated after President Luiz Inacio Lula da Silva said the proposal for a new fiscal framework will only be announced after his visit to China. It was initially expected to be unveiled this week. Lula will be in China from March 26 to 30.
Brazil's central bank was also on tap for the week, with expectations that it will leave the Selic rate unchanged at 13.75% for the fifth straight meeting. Currencies of the world's two biggest copper miners, Chile and Peru added 0.4% and 0.5%, respectively, after prices of the red metal jumped. Santiago stocks rose 2.5%, while Peruvian equities gained about 1.1%. Colombia's peso firmed 0.2%, while the Mexican peso jumped 1% as both oil producers benefited from higher crude prices. Mexico's inflation likely eased in the first half of March, but still remained well above the official target, a Reuters poll showed, reinforcing bets the central bank will raise rates again at its next meeting. Most emerging market assets have been hammered by fears of contagion sparked by distressed Swiss lender Credit Suisse and the collapse of two big regional U.S. banks. The MSCI's index for Latam stocks is down nearly 4% in March, heading for its second straight monthly decline.
"China and a softish dollar offer potential EM upside amid uncertainty," said Jon Harrison, managing director of EM macro strategy at TS Lombard, in a note. Harrison added that Taiwan, Brazil, and Mexico were his top equity calls. Ecuador declared a state of emergency in 14 provinces worst affected by severe weather and a strong earthquake that shook the country over the weekend.
Uruguay's economy is seen growing 2.0% this year, according
to an International Monetary Fund (IMF) forecast released on
Monday.
Key Latin American stock indexes and currencies at 1840 GMT:
Stock indexes Latest Daily %
change
MSCI Emerging Markets 953.05 1.07 MSCI LatAm 2101.40 1.2 Brazil Bovespa 101097.87 0.17 Mexico IPC 52627.19 1.35 Chile IPSA 5296.97 2.45 Argentina MerVal 227685.30 2.997 Colombia COLCAP 1130.12 1.78 Currencies Latest Daily %
change
Brazil real 5.2379 0.08 Mexico peso 18.6440 0.90 Chile peso 821.6 0.43 Colombia peso 4802.5 0.24
Peru sol 3.7712 -0.18 Argentina peso 205.0100 -0.23
(interbank) Argentina peso 390 -1.03
(parallel) (Reporting by Shreyashi Sanyal and Bansari Mayur Kamdar in
Bengaluru; Editing by Richard Chang)
