July 25, 2019 / 8:20 PM / 24 days ago

EMERGING MARKETS-ECB limits gains for risky Latam assets; banks weigh on Bovespa

 (Updates with market close)
    By Sruthi Shankar
    July 25 (Reuters) - Latin American currencies and stocks
mirrored weakness in risky assets globally on Thursday after the
European Central Bank Chief Mario Draghi toned down expectations
of aggressive monetary policy easing.
    The ECB left interest rates unchanged after its policy
meeting, but signaled rate cuts ahead, initially supporting risk
sentiment. However, Draghi sounded more upbeat on the economy
than investors had expected and said policymakers had not
discussed rate cuts.
    "Rates and risk markets have completely reversed the initial
exuberance, which is likely due to the lack of details in
Draghi's press conference," Mohammed Kazmi, portfolio manager at
UBP, wrote in a note.
    "We are used to Draghi delivering a dovish message, which
meant that the bar was high for risk and rates markets to rally
further, given pre-positioning into the meeting."
    Emerging market assets, which typically gain on bets of
interest rate cuts from developed world central banks, fell.
    Brazil's real edged lower, while the Bovespa stock
index slumped over 1.5% due to weakness in heavyweight
banking shares.
    Shares in Banco Bradesco SA, which surged to
record highs this year, fell nearly 6% even as the lender
reported better-than-expected quarterly profit.
    Petrobras fell nearly 2%, despite gaining oil
prices, as Brazil's top court ordered the state-run oil company
to refuel two Iranian grain vessels stranded on the Brazilian
coast. Petrobras had denied service, citing the risk of
consequences from U.S. sanctions.  
    A bright spot among stocks was brewer Ambev, up
9% after posting better-than-expected quarterly results.

    Data showed Brazil posted a current account deficit of $2.9
billion in June, the biggest shortfall since January and almost
twice as wide as the $1.5 billion deficit median forecast in a
Reuters poll.
    Brazil's economy is struggling to emerge from a crippling
recession, with the government focused on passing through
Congress a pension overhaul that it hopes will prop up public
finances and kick-start growth.
    Mexican stocks were weighed down by Cemex
, which slid about 3% after it posted downbeat
earnings that were hurt by lower volumes amid trade conflicts.
 
    The Mexican peso, however, held steady after data
showed retail sales rose 2.8% in May, topping market
expectations - an encouraging sign after weak recent data
sparked recession fears for Latin America's No. 2 economy.

    The Argentine peso fell over 1%, hit by political
uncertainty ahead of presidential election later this year.
    Latest polls show President Mauricio Macri is neck-and-neck
with main Peronist rival Alberto Fernandez in polls ahead of
elections in October.         
    
    Key Latin American stock indexes and currencies at 2000 GMT:
    
     Stock indexes              Latest    Daily %
                                          change
 MSCI Emerging Markets           1053.11    -0.21
                                          
 MSCI LatAm                      2855.05    -1.57
                                          
 Brazil Bovespa                102435.88    -1.62
                                          
 Mexico IPC                     40964.49    -0.49
                                          
 Chile IPSA                      4981.02     0.24
                                          
 Argentina MerVal               39774.36    -0.03
                                          
 Colombia IGBC                  12950.05     0.27
                                          
                                                 
         Currencies             Latest    Daily %
                                          change
 Brazil real                      3.7826    -0.37
                                          
 Mexico peso                     19.0400     0.05
                                          
 Chile peso                          696    -0.83
                                          
 Colombia peso                    3215.9    -0.55
 Peru sol                          3.296    -0.06
                                          
 Argentina peso (interbank)      43.3700    -1.08
                                          
 
 (Reporting by Sruthi Shankar and Agamoni Ghosh in Bengaluru;
editing by Diane Craft)
  
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