EMERGING MARKETS-LatAm assets retreat as oil volatility, strong dollar weigh
By Sudeshna Ghoshal, Ragini Mathur and Avinash P
Nov 12 (Reuters) - Most Latin American stocks and currencies retreated on Thursday, surrendering part of the previous session's gains as oil-price volatility, lower metal prices and a stronger dollar weighed on assets.
Oil prices swung as persistent geopolitical tensions offset pressure from rising crude output. President Donald Trump's comment that the US didn't need a deal with Iran added to uncertainty.
Latin America was initially seen as a potential beneficiary because it could serve as an alternative crude supplier. But higher energy costs have also raised inflation concerns and clouded the region's economic outlook.
In Brazil, data showed consumer prices rose less than expected in the 12 months through October but remained above the central bank's target range.
"The headline rate is still likely to rise in the coming months and, taken together with a high fiscal risk premium, Copom (Monetary Policy Committee) is unlikely to resume its monetary easing cycle for some time," said William Jackson, chief emerging markets economist at Capital Economics.
Central bank Governor Gabriel Galipolo said on Wednesday that providing policy guidance had limited value in an uncertain economic environment, even as markets seek clearer signals.
"What matters, to be honest, is whether the central bank remains consistent with its decisions, positions and communications," said Andres Abadia, chief Latin America economist at Pantheon Macroeconomics.
"Less guidance could mean more volatility, but it does not necessarily mean less credibility."
Shares in Banco do Brasil BBAS3.SA fell 8.3% to their lowest level in over three years after the state-run lender posted weaker-than-expected third-quarter results and halved its full-year profit forecast.
The lender was the biggest drag on the equities index .BVSP that fell 0.75%.
Developing-world assets were also pressured by the US dollar, which hit a 19-month high after this week's strong inflation data increased bets on a more hawkish Federal Reserve.
The real slipped to 5.6548 a dollar, its weakest level in 17 months and was last down 1.23%.
The MSCI regional equities gauge fell 1.4%, while a parallel currencies index .MILA00000CUS lost 0.9%.
Elsewhere, Trump threatened on Thursday to double tariffs on Mexico if it does not stop more than a thousand migrants heading north toward the US following last week's midterm elections.
Mexican assets nevertheless outperformed their peers. The peso was down 0.17%. Mexican shares .MXX inched 0.25% lower after hitting a record high in the previous session.
Mexico's benchmark gained about 9% in October, while the broader Latin American equity index .MILA00000PUS shed around 8% over the same period amid uncertainty surrounding Brazil's fiscal outlook following President Luiz Inácio Lula da Silva's reelection that triggered a sharp selloff in assets.
The Chilean peso fell 1.29%. Copper prices, a key driver for Chile's currency, dropped to a four-month low. MET/L
Argentina's monthly inflation rate rose to 2.2% in October, slightly above the level seen in September, while the 12-month figure slightly declined to 33.1%, data showed.
The country's currency was muted.
Key Latin American stock indexes and currencies as of 1939 GMT:
Stock indexes | Latest | Daily % change |
MSCI Emerging Markets .MSCIEF | 1552.97 | -1.48 |
MSCI LatAm .MILA00000PUS | 2790.26 | -1.4 |
Brazil Bovespa .BVSP | 170774 | -0.75 |
Mexico IPC .MXX | 71826.2 | -0.25 |
Colombia COLCAP .COLCAP | 2453.45 | -1.32 |
Currencies | Latest | Daily % change |
Brazil real | 5.651 | -1.23 |
Mexico peso | 18.617 | -0.17 |
Chile peso | 994.7 | -1.29 |
Colombia peso | 3303.75 | -0.72 |
Peru sol | 3.4081 | -0.05 |
Argentina peso (interbank) | 1,545.00 | 0 |
Argentina peso (parallel) | 1,545.00 | 0.32 |