January 22, 2018 / 4:49 PM / 8 months ago

EMERGING MARKETS-Brazil markets steady ahead of ex-president Lula's trial

    By Bruno Federowski
    BRASILIA, Jan 22 (Reuters) - Brazilian markets were
range-bound on Monday as traders avoided big bets ahead of the
trial of former President Luiz Inácio Lula da Silva, who is
leading opinion polls for this year's elections.
    Lula has vowed to revert part of President Michel Temer's
reform agenda if elected, but he could be barred from running if
a higher court upholds his conviction for corruption at trial on
 Wednesday.
    In general, traders expect that to be the case, paving the
way for a market-friendly successor who will stick to Temer's
unpopular platform. Temer's approval rates have tumbled to
single-digits in the wake of corruption scandals and he has said
he would not run for reelection.
    Coupled with strong global demand for emerging market
assets, those bets have underpinned a rally in Brazil's markets
that drove its benchmark stock index to all-time highs
and the Brazilian real to two-month peaks.
    Miriam Tavares, the head of currency trading at AGK
brokerage, said the Brazilian currency could strengthen even
more in the case of a unanimous ruling on Wednesday, potentially
driving it past the 3.20 per dollar milestone.
    A unanimous decision among the three judges could make it
harder for Lula to appeal, traders said.
    The Brazilian real was nearly flat in early afternoon
trading, while the benchmark Bovespa stock index rose
0.2 percent.
    Shares of Centrais Elétricas Brasileiras SA
jumped over 10 percent after the government sent to Congress a
draft bill proposing to privatize the state-controlled power
utility.
    Other Latin American markets seesawed as concerns over a
possible U.S. government shutdown stoked caution among
investors.
    On Thursday, the U.S. House of Representatives passed a bill
to fund government operations through Feb. 16 and avoid agency
shutdowns from Saturday when existing allocations expire. The
bill has yet to be approved by the Senate, where it faces an
uncertain future.
    
    Latin American stock indexes and currencies at 1720 GMT:
 Stock indexes                               daily %   YTD %
                                  Latest      change  change
 MSCI Emerging Markets              1237.54      0.4     6.4
                                                      
 MSCI LatAm                         3077.00     0.12    8.67
 Brazil Bovespa                    81367.13     0.18    6.50
 Mexico IPC                        49968.04     0.55    1.24
 Chile IPSA                         5820.19    -0.62    4.59
 Chile IGPA                        29245.88    -0.53    4.52
 Argentina MerVal                  33531.36    -0.18   11.53
 Colombia IGBC                     12011.82     0.95    5.64
                                                            
 Currencies                                  daily %   YTD %
                                              change  change
                                     Latest           
 Brazil real                         3.2045    -0.12    3.40
                                                      
 Mexico peso                        18.7000    -0.34    5.34
                                                      
 Chile peso                             606     0.40    1.43
 Colombia peso                      2855.85    -0.45    4.42
 Peru sol                             3.213     0.09    0.75
                                                      
 Argentina peso (interbank)         19.1250    -0.69   -2.75
                                                      
 Argentina peso (parallel)            19.72    -0.15   -2.48
                                                      
 
 (Reporting by Bruno Federowski; editing by Grant McCool)
  
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