EMERGING MARKETS-LatAm assets slide as surging US yields lift dollar, oil gains

By Utkarsh Hathi

Oct 1 (Reuters) - Most Latin American assets came under pressure on Thursday, in line with broader global markets, as surging Treasury yields propelled the dollar to one-year highs, prompting investors to pull back from risk-sensitive emerging-market assets.

The 10-year US Treasury yield — a benchmark for global borrowing costs — rose to 5.344%, its highest since 2002 before easing. A softer-than-expected August inflation reading on Wednesday did little to ease investor concerns amid fears of a prolonged disruption to global energy supplies.

Brent crude gained 3.2% after sources said Chinese refiners suspended oil product exports for October to preserve domestic stocks, further straining supplies. O/R

The US dollar index rose 0.5% to its highest since mid-April 2025.

MSCI's index of Latin American currencies .MILA00000CUS fell 1.1% while its stocks equivalent .MILA00000PUS declined 0.8%. Both indexes marked declines for September amid the surging yields and oil prices.

"What we're seeing in terms of positioning is a more complex and challenging environment for LatAm and particularly for FX for carry positions," said Alejandro Cuadrado, managing director, global head FX & LatAm strategy at BBVA.

In Brazil, the presidential campaign closes on Thursday ahead of Sunday's vote, which will decide whether Brazil follows the broad conservative shift in political regimes across the region.

Brazil's real weakened 0.9%, while its benchmark Ibovespa index .BVSP edged up 0.4% in afternoon trading, helped by energy giant Petrobras , that rose 1.7% on higher oil prices.

Trade Minister Elias Rosa said on Wednesday Brazil is seeking a "full tariff reduction" in talks with the US, after a meeting with US Trade Representative Jamieson Greer at the G20 meeting.

Mexico's peso weakened 1.4% further to its lowest since December 2025, while its stocks .MXX fell 0.5%.

In Chile, economic activity unexpectedly fell 1% in August from a year earlier, reflecting weakness in its mining sector.

Chile's peso dropped 1.3% to its lowest since July 2025.

"The market has tended to use the Chilean peso as a funding currency, so short the Chilean peso because of the low level of rates," Cuadrado added.

Global ratings agency Moody's raised Bolivia's sovereign rating on Wednesday for the second time this year, citing a material decline in the country's credit-event risk.

The Colombian peso <COP=> reversed its gains to fall 0.5% against the greenback. Colombia's central bank raised interest rates by a quarter point on Wednesday in a surprise move, amid persistent inflationary pressures.

The IMF said it will continue discussions with Argentina over the coming weeks with a view to reaching a staff-level agreement on the third review of Argentina's Extended Fund Facility program.

The chief executive of TotalEnergies TTEF.PA said the French oil company plans to invest $10 billion in Argentina.

The country's stocks .MERV slid 2.3%.

Key Latin American stock indexes and currencies at 1937 GMT