November 7, 2017 / 3:54 PM / a year ago

EMERGING MARKETS-Brazil stocks fall as uncertainty over reforms grows

    By Bruno Federowski
    SAO PAULO, Nov 7 (Reuters) - Brazilian stocks fell on
Tuesday on fading expectations that President Michel Temer will
manage to further cut government spending after corruption
charges drained his political clout.
    Finance Minister Henrique Meirelles on Tuesday said that
Temer's pension overhaul plan, which is seen by investors as key
to curbing growth of public debt, could be approved next year if
there is no time to do so in 2017.
    Nevertheless, traders remained skeptical of such prospects,
with wide-open presidential elections fast approaching and
reducing the prospects of any meaningful reforms. That could
drive lawmakers allied to the unpopular center-right president
to water down the plan in order to guarantee passage.
    "The market is working with the assumption of a very limited
reform," analysts at Citibank wrote in a client note.
    The benchmark Bovespa stock index fell 1.6 percent
to a two-month low, with shares of loyalty program Smiles SA
 the biggest decliners.
    Smiles on Monday reported operating profits below analyst
expectations, driving investors to book profits on the stock's
recent rally. In a client note, analysts at Banco BTG Pactual SA
said the stock is no longer "a bargain."
    Still, shares in Brazilian rental car agency Localiza Rent a
Car SA hit a 10-month high after the company posted
strong top-line gains in the third quarter.
    The Brazilian real was down 0.5 percent, in line with
the Mexican peso, as investors renewed bets that U.S.
interest rates will rise faster-than-expected in coming months
as the economy recovers.
    Higher U.S. rates could drive investors away from
high-yielding assets in emerging markets.
    Key Latin American stock indexes and currencies at 1530 GMT:
 Stock indexes                                daily %    YTD %
                                     Latest    change   change
 MSCI Emerging Markets               1135.37     0.38    31.17
 MSCI LatAm                          2789.60    -0.65    19.96
 Brazil Bovespa                     73147.67    -1.57    21.45
 Mexico S&P/BVM IPC                 49202.26     0.48     7.80
 Chile IPSA                          5520.01    -0.14    32.97
 Chile IGPA                         27739.08    -0.12    33.78
 Argentina MerVal                   28441.66     1.66    68.12
 Colombia IGBC                      10610.74     0.35     4.77
 Venezuela IBC                        708.66     -0.1   -97.76
 Currencies                                   daily %    YTD %
                                               change   change
 Brazil real                          3.2749    -0.52    -0.78
 Mexico peso                         19.1120    -0.49     8.54
 Chile peso                            633.3    -0.19     5.91
 Colombia peso                       3036.49    -0.01    -1.15
 Peru sol                               3.24    -0.06     5.37
 Argentina peso (interbank)          17.6450     0.03   -10.03
 Argentina peso (parallel)             17.98     0.17    -6.45
 (Reporting by Bruno Federowski; Editing by Andrea Ricci)
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