* Chilean election results likely market positive- GS
* Strong economic data limits MXN losses
* EMFX at 3-month low, stocks slump 1.9%
(Updates prices)
By Ambar Warrick and Susan Mathew
July 19 (Reuters) – Brazil’s real sank 2% on Monday, leading
losses across Latin American currencies on rising inflation
expectations, while Chile’s main stock index rose after moderate
candidates emerged as major presidential contenders.
MSCI’s index of Latin American currencies
dropped 2.2% and headed for its worst day in 10 months, as
rising coronavirus cases led to a sell-off in risk assets across
the globe on worries infections would slow down a nascent
economic recovery.
Emerging market stocks slumped 1.9% and were set
for their worst day in four months, while currencies
hit near a three-month low, down 0.6%.
An index of Latam stocks slumped 4.1%,
heading for their worst day in nearly five months, tracking a
broader sell off.
The real fell to 5.23 against the dollar as a
weekly central bank survey showed expectations for 2021
Brazilian inflation spiked up to 6.3%, well above the central
bank’s year-end goal of 3.75% and more than a percentage point
above the 5.25% upper limit of its wider range.
While investors also penciled in more interest rate hikes by
the central bank to counter the rise in prices fueled by
accelerating growth and easing of COVID-19 restrictions, a
significant jump in inflation could hurt Brazil’s economic
recovery by denting consumer spending.
“Rising CPI inflation penalizes, above all, the poorest
households, eroding the purchasing power of emergency aid,”
analysts at TS Lombard wrote in a note. “Banco Central will
likely front-load rate hikes amid rising inflationary
pressures.”
The world’s two largest copper producers Chile and Peru
saw their currencies drop as copper prices slid on demand
doubts and a strong dollar, with Chile’s peso erasing
early gains to hit its lowest nearly eight months.
But Santiago-listed stocks bucked the trend,
rallying 1.5%, as results of nominating contests for November’s
presidential election saw leftist former student leader Gabriel
Boric and center-right independent Sebastian Sichel finish
strongly.
While both were surprise picks, they were viewed as being
more moderate than other contenders.
“The outcome of the primaries will likely be perceived as
moderately market positive,” Goldman Sachs analysts wrote,
noting a defeat in the left-wing primary of an early communist
party favorite and Sichel’s reformist views.
Mexico’s peso fell 0.7%, but data that showed the
country’s economy surged by nearly 15% in June, provided some
optimism about recovery from a pandemic-induced slump.
Colombia’s peso fell 0.5%, extending losses to a
third straight session, tracking declines in oil prices.
Latin American stock indexes and currencies:
Stock indexes Latest Daily %
change
MSCI Emerging Markets 1315.01 -1.87
MSCI LatAm 2477.00 -3.96
Brazil Bovespa 123739.78 -1.76
Mexico IPC 48885.04 -2.52
Chile IPSA 4214.24 1.47
Argentina MerVal 62349.41 -1.175
Colombia COLCAP 1245.67 -2.11
Currencies Latest Daily %
change
Brazil real 5.2333 -2.24
Mexico peso 20.0460 -0.85
Chile peso 759.8 -0.30
Colombia peso 3838.07 -0.64
Peru sol 3.9441 -1.04
Argentina peso 96.3000 -0.08
(interbank)
(Reporting by Ambar Warrick and Susan Mathew in Bengaluru;
Editing by Tomasz Janowski and Grant McCool)
