November 8, 2019 / 3:35 PM / 8 months ago

EMERGING MARKETS-Brazil real eyes worst week in a year amid domestic, trade worries

    By Sruthi Shankar
    Nov 8 (Reuters) - The Brazilian real was set to record its
worst week in over a year on Friday, hit by underwhelming oil
auctions and political concerns sparked by a Supreme Court
ruling that could lead to the release of former President Luiz
Inacio Lula da Silva.
    The real dropped about 1% to 4.1398 per dollar,
adding to sharp declines this week after major global oil firms
snubbed Brazil's biggest-ever pre-salt oil auction, with only
the state-owned Petrobras and Chinese state firm
CNODC awarded blocs.
    Adding to the downbeat mood, Brazil's Supreme Court decided
on Thursday to end the mandatory imprisonment of convicted
criminals after they lose their first appeal, overturning a rule
that contributed to the success of Brazil's biggest corruption
investigation, the so-called Car Wash operation.
    The ruling, which allows convicts to exhaust their appeal
options before being locked up, could benefit dozens of
high-profile prisoners, among them Lula, jailed last year for
taking bribes.
    If and when he is released, Lula would be free to engage in
politics but would not be eligible under Brazil's Clean Record
law to seek elected office for eight years after his first
conviction in June 2017.
    "Lula may have the ability to unite the left side of the
political spectrum, thus increasing opposition to fiscal reforms
and austerity measures," said Simon Harvey, FX analyst at Monex
    "Much of today's weakness can be attributed to the double
whammy of poor oil auctions."
    Brazil's Bovespa fell 0.9%, but still was on track
to the end the week higher, helped by some upbeat earnings
reports and optimism over a U.S.-China trade deal. 
    However, doubts about an agreement between Washington and
Beijing to rollback tariffs imposed on each other's goods kept
investors on edge. Sources familiar with the matter told Reuters
the deal faces fierce internal opposition at the White House.

    U.S. President Donald Trump on Friday told reporters he has
not agreed to roll back tariffs on China but that Beijing would
like him to do so.
    The Mexican peso held steady, but the Chilean
and the Colombian fell amid falling commodity prices.

  Key Latin American stock indexes and currencies at 1458 GMT:  
       Stock indexes                 Latest       Daily %
 MSCI Emerging Markets                 1065.97         -0.71
 MSCI LatAm                            2762.61         -1.22
 Brazil Bovespa                      108619.22         -0.88
 Mexico IPC                           44041.41         -0.18
 Chile IPSA                            4700.69           0.6
 Argentina MerVal                     34976.35        -2.489
 Colombia IGBC                        13372.95         -0.74
           Currencies                Latest       Daily %
 Brazil real                            4.1358         -1.03
 Mexico peso                           19.1066          0.13
 Chile peso                              746.1         -0.51
 Colombia peso                          3336.1         -0.60
 Peru sol                               3.3478         -0.14
 Argentina peso (interbank)            59.5000          0.17
 (Reporting by Sruthi Shankar in Bengaluru
Editing by Alistair Bell)
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