October 4, 2019 / 7:54 PM / 4 months ago

EMERGING MARKETS-Wall Street's rally on jobs data powers 2% surge in Latam shares

 (Updates prices)
    By Susan Mathew
    Oct 4 (Reuters) - Latin American stocks rallied on Friday,
with Mexican shares set for their best session in six months, as
they tracked a strong rise on Wall Street after U.S. data
showing moderate jobs growth offered some relief from recession
    The Labor Department's September data showed that U.S.
non-farm payrolls increased by 136,000 and the unemployment rate
dropped to a 50-year low. But analysts say the report was not
upbeat enough to throw the U.S. Federal Reserve's easing cycle
off its path.
    "There was nothing in the U.S. employment report ... to
change our view that the U.S. economy will slow further and that
the Fed will cut rates only one more time in this cycle," wrote
Hubert de Barochez, a market economist at Capital Economics.
    That provided an additional boost to risk assets such as
stocks. MSCI's index of Latam shares rose 2% to
log its best session in a month and helped erase almost all of
its losses this week. 
    Mexican shares jumped 2.3%, while those in Brazil
 climbed almost 1%. Argentine stocks surged 4% to
touch their highest in three weeks, while Chile stocks
rose for the first time in four sessions. 
    Against a steady dollar, most regional currencies made gains
with Brazil's real hitting a three-week high, while the
Mexican peso extended gains to a third straight session.
    A Fed easing cycle should keep the dollar pressured and
support Latam currencies, wrote Gustavo Rangel, chief LATAM
economist at ING, adding that he sees more downside for the
greenback early next year.
    "It would benefit Latam currencies that are more sensitive
to external drivers and risk aversion generally, such as the
Colombian peso and Brazil's real," he said, but would
hurt currencies with stronger domestic anchors such as the
Mexican peso. 
    The Argentine peso slipped, logging its seventh
losing session in eight. The outlook for the currency remains
shaky with general elections later this month expected to all
but assure volatility.
    President Mauricio Macri's loss by a much
wider-than-expected margin in presidential primaries in August
saw the country's markets crash on fears of return to populist
policies under main rival Alberto Fernandez. 
    "Given Fernandez's unorthodox economic policy credentials,
his ability to roll over debt amortizations should be further
debilitated," wrote ING's Rangel.
    "A debt default is not inevitable, but it would likely
require a considerable policy tightening and that seems,
arguably, unrealistic to expect from Fernandez."

    Key Latin American stock indexes and currencies at 1931 GMT:
    Stock indexes             Latest    Daily %
 MSCI Emerging Markets          997.05      0.48
 MSCI LatAm                    2687.32      2.04
 Brazil Bovespa              102430.08       0.9
 Mexico IPC                   43403.01      2.26
 Chile IPSA                    5039.54      0.78
 Argentina MerVal             31553.32      3.91
 Colombia IGBC                12914.02      0.07
       Currencies             Latest    Daily %
 Brazil real                    4.0600      0.71
 Mexico peso                   19.5484      0.49
 Chile peso                      715.5      0.08
 Colombia peso                    3430      0.41
 Peru sol                        3.379     -0.18
 Argentina peso                57.7300      0.07

 (Reporting by Susan Mathew in Bengaluru;)
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