Stocks, FX drop as hawkish Fed bets rise; Latam FX outperform

Stocks, FX drop as hawkish Fed bets rise; Latam FX outperform


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Emerging market stocks fell sharply on

Friday as strong U.S. jobs growth fanned fears of aggressive

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rate hikes from the Federal Reserve while Mexico and Chile’s

currencies rose after inflation data that did little to alter

the outlook for interest rates in the Latin American countries.

Data showed U.S. employers hired more workers than expected

in September and the unemployment rate dropped, fueling bets of

a fourth straight 75 basis point interest rate hike from the

Federal Reserve and strengthening the dollar.

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MSCI’s emerging market (EM) stock index fell 1.6%,

while the currencies counterpart dropped 0.6%,

snapping a six-session winning streak.

“The USD has not found the appropriate catalysts for peaking

… and the terrain for EM FX continues to be fraught with

obstacles,” wrote Societe Generale strategists in a note.

Most Asian currencies were in the red while elsewhere, the

Polish zloty was up 0.7% against the euro as it

recovered from a 1.5% slide on Thursday.

LATAM STAYS RESILIENT

The Mexican peso rose 0.4% while Chile’s peso

was up 0.7% against the dollar.

Mexico’s inflation steadied at 8.7% in the 12 months through

September, data showed on Friday, halting an upward trend that

had pushed consumer prices to 22-year highs. However, it was

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still well above the central bank’s target range.

“With the Fed still in a hawkish mood, (Mexico’s) tightening

cycle has a bit further to run,” said Jason Tuvey, senior

emerging markets economist at Capital Economics.

Similarly, Chile’s inflation reached 0.9% in September,

decelerating from the previous month but taking the local

12-month rate of consumer price increases to 13.7%, still far

above the central bank’s target range.

“We continue to expect the BCCh (Banco Central de Chile)

to hike 50bp, taking the policy rate to 11.25% in next week’s

meeting,” said Barclays economists Pilar Tavella and Nestor

Rodriguez.

“We do not think that the BCCh will have room to cut

rates until the second half of 2023.”

Peru’s sol rose 0.2%. The country’s central bank

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increased its benchmark interest rate by 25 basis points, as

expected on Thursday.

Brazil’s real was flat while Colombia’s peso

reversed early gains and was last down 0.1%.

Elsewhere, Russia’s annual inflation slowed further in

September, but consumer prices rose in month-on-month terms for

the first time since May, data showed on Friday.

Mexico’s growth

is projected to slow in the next few quarters, the

International Monetary Fund said on Friday.

Key Latin American stock indexes and currencies at 1846 GMT:

Stock indexes Latest Daily % change

MSCI Emerging Markets 896.49 -1.55

MSCI LatAm 2206.85 -1.33

Brazil Bovespa 116385.45 -1

Mexico IPC 45883.55 -0.96

Chile IPSA 5080.42 -1.99

Argentina MerVal 144645.33 -1.416

Colombia COLCAP 1207.80 -0.85

Currencies Latest Daily % change

Brazil real 5.2130 -0.07

Mexico peso 20.0270 0.39

Chile peso 936.9 0.67

Colombia peso 4614.13 -0.14

Peru sol 3.9534 0.24

Argentina peso 149.1700 -0.18

(interbank)

Argentina peso 273 3.30

(parallel)

(Reporting by Susan Mathew and Amruta Khandekar in Bengaluru;

Editing by Paul Simao and Andrea Ricci)

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