EMERGING MARKETS-Latam stocks, FX slide as hot US inflation data lifts dollar, Treasury yields

By Reuters News

By Ragini Mathur and Sudeshna Ghoshal

- Most Latin American stocks and currencies fell on Wednesday after a hotter-than-expected US inflation report hurt risk appetite and pushed up the dollar and Treasury yields.

Consumer prices in the world's largest economy rose faster than expected last month, strengthening bets that the Federal Reserve will raise rates again as soon as this month.

"September core inflation was hotter than expected and this has reinforced the view that the Federal Reserve has more work to do to contain price pressures," said James Knightley, chief international economist at ING.

The dollar index gained 0.7%, and the benchmark 10-year Treasury yield climbed 6.6 basis points to 5.283%.

A stronger dollar and higher US yields tend to hurt emerging markets as they make safer US assets more attractive and draw money out of riskier markets.

MSCI's gauge of Latin American stocks .MILA00000PUS slipped 1.6% and its regional currency index .MILA00000CUS fell 0.7%. Both added to the previous session's losses and hit their lowest levels in more than a week during intraday trade.

BRAZIL LEADS REGIONAL LOSSES

Brazil led the region's losses for a second straight day. The Bovespa .BVSP fell 0.9% and the real edged 0.3% lower. Services activity in Latin America's largest economy shrank 0.1% in August from the previous month, adding to signs of a slowdown.

Together with renewed inflation pressure, the data makes the central bank's policy choices harder. Uncertainty ahead of this month's presidential runoff also kept investors on edge.

Additionally, Brazil announced on Tuesday it would send a bill to Congress aimed at forgiving micro-entrepreneurs' debt with the government, adding it seeks to tackle about 12.6 billion reais ($2.51 billion) in debt.

"The administration continues announcing measures that could potentially damage the fiscal outlook in coming years," said Citi analysts in a note.

In Argentina, a senior International Monetary Fund official said the country needs to overhaul its tax system, including removing value-added tax exemptions, to move its fiscal consolidation forward.

The country's stock index .MERV fell 0.7%, while its currency was little changed.

Data on Tuesday showed monthly inflation rose slightly to 1.9% in September from August, though the annual rate eased a little.

The IMF cut its growth forecasts earlier this week for Latin America and the Caribbean for this year and next. It said most of the region was getting little lift from the AI boom that has helped other economies absorb the energy shock from the Middle East war.

UGANDA HIKES TO DEFEND SHILLING

Outside Latin America, Uganda's central bank held an emergency meeting and raised its main interest rate by 2.25 percentage points to 12.0%. The move aims to stop a sharp slide in the shilling , which has hit repeated record lows as oil importers scramble for dollars.

The currency rose more than 4% after the decision.

Key Latin American stock indexes and currencies at 14:54 GMT:

Stock indexes

Latest

Daily % change

MSCI Emerging Markets .MSCIEF

1656.96

-0.21

MSCI LatAm .MILA00000PUS

3302.19

-1.59

Brazil Bovespa .BVSP

204937.13

-0.94

Mexico IPC .MXX

66705.11

-0.39

Argentina MerVal .MERV

2849689.82

-0.68

Colombia COLCAP .COLCAP

2570.26

0

Currencies

Latest

Daily % change

Brazil real

5.0423

-0.31

Mexico peso

18.55

-1.04

Chile peso

988.01

-0.61

Colombia peso

3199.95

-0.65

Peru sol

3.4335

-0.13

Argentina peso (interbank)

1,514.5

-0.03

Argentina peso (parallel)

1,535.0

0.97

Capital.com is an execution-only brokerage platform and the content provided on the Capital.com website is intended for informational purposes only and should not be regarded as an offer to sell or a solicitation of an offer to buy the products or securities to which it applies. No representation or warranty is given as to the accuracy or completeness of the information provided.

The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance.

To the extent permitted by law, in no event shall Capital.com (or any affiliate or employee) have any liability for any loss arising from the use of the information provided. Any person acting on the information does so entirely at their own risk.

Any information which could be construed as “investment research” has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication.