* Mexico, Colombian currencies both add 0.9%
* EM bonds under pressure
* Brazil's real flat as virus fears weigh
By Ambar Warrick
Jan 6 (Reuters) - The Mexican and Colombian pesos surged on
Wednesday tracking higher oil prices, while other Latin American
currencies rose as the prospect of a Democrat-controlled U.S.
Senate drove down the dollar and pushed flows into risk assets
outside America.
U.S. stock futures and the dollar retreated after Democrats
won one U.S. Senate race in Georgia and led in another on
Wednesday, moving closer to a majority that will allow
President-elect Joe Biden to carry out his agenda.
His agenda includes increased stimulus measures and higher
corporate taxes. The prospect of higher fiscal spending weighed
on the dollar, while the possibility of higher corporate taxes
hurt the outlook for several U.S. stock sectors, particularly
technology.
In Latin America, Mexico's peso rose 0.9% against the
dollar while fellow oil exporter Colombia's peso also
surged, as oil prices hit a 11-month high after Saudi Arabia
announced a big voluntary production cut.
"If you think of the key drivers of EM risk assets - on the
monetary side - it's negative rates. It effectively means that
capital is being moved out of the U.S. into the rest of the
world," said Polina Kurdyavko, head of emerging markets at
BlueBay Asset Management.
Brazil's real was flat in early trade, despite data
showing an expansion in the country's services sector through
December.
Latin America's largest economy is among the worst hit in
the world by the coronavirus, and the country is racing to ramp
up vaccinations amid a renewed surge in infections.
The MSCI's index of Latin American stocks
rose 1.4% in early trade.
But in the fixed income space, broader emerging market
investment-grade bonds came under pressure from expectations of
increased U.S. debt issuance.
Abu Dhabi and Qatar sovereign
2050 Eurobonds were 1.8 cents lower to their weakest in two
months, while Saudi Arabia's 2060 issue sank 1.9
cents to its lowest since mid July, Refinitiv data showed.
"There's a high probability and expectation that in the U.S.
there'll be a blue wave and big infrastructure spending and that
of course means the U.S. government will issue more debt. That
has put not just GCC (Gulf Cooperation Council) but investment
grade names under pressure across EM," said Alejandro Arevalo,
emerging market debt manager at Jupiter Asset Management.
Key Latin American stock indexes and currencies:
Latest Daily % change
MSCI Emerging Markets 1324.08 0.31
MSCI LatAm 2480.78 1.37
Brazil Bovespa 119317.74 -0.05
Mexico IPC - -
Chile IPSA 4374.99 0.18
Argentina MerVal - -
Colombia COLCAP 1431.73 0 Currencies Latest Daily % change
Brazil real 5.2579 0.11
Mexico peso 19.6978 0.91
Chile peso 693.7 0.22
Colombia peso 3410.15 0.91
Peru sol 3.6098 0.50
Argentina peso 84.8900 -0.09
(interbank)
(Reporting by Ambar Warrick in Bengaluru; Additional reporting
by Sruthi Shankar and Tom Arnold)
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