July 26, 2019 / 8:38 PM / 6 months ago

EMERGING MARKETS-Latam markets range-bound ahead of Fed, Brazil rate decisions

    * Colombian central banks hold rates, as expected  
    * Petrobras shares fall on 2019 production cut
    * Weak Mexico data stokes recession fears  

 (Updates with market close)
    By Sruthi Shankar
    July 26 (Reuters) - Latin American currencies traded in
tight ranges on Friday, as investors braced for central bank
decisions from the United States and Brazil next week, with the
Mexican markets coming under pressure from Pemex's weak results
and worrying economic data.
    The debt-heavy Mexican oil giant posted another quarter of
major losses, weighed down by falling output and lower crude
prices, as it faces the prospect of a fresh downgrade from
credit agencies critical of its direction.
    Mexico's peso slid 0.3%, while the MSCI's index of
Latin American currencies was up 0.14%.
    Investors are concerned about a Moody's downgrade on the
company's debt to so-called junk status after Fitch moved to
downgrade its bonds in June. A Moody's analyst said he expected
Pemex to require more support from the government to avoid
increasing its net debt.
    "The key thing is stabilizing production, but it
(Pemex)continues to bleed cash and capital expenditure is going
to be large, which worries investors, given the sovereign
support they're going to need going forward," said Jim
Barrineau, head of emerging markets debt at Schroders.
    "I think a downgrade is baked in the cake at this point."
    Adding to worries, Latin America's second-largest economy 
contracted 0.4% in May from a year earlier, the national
statistics agency said. The data followed a gloomy forecast for
Latin America from the International Monetary Fund which
forecast Mexico's economy to grow 0.9% this year, below its
forecast of 1.6% three months ago.
    After the European Central Bank failed to enthuse investors
with a firm plan on monetary policy easing on Thursday,
investors are looking ahead to the U.S. Federal Reserve meeting
next week, with traders already pricing in a 25 basis-point
interest rate cut. 
    The Brazilian real held steady ahead of the country's
central bank meeting next week, where, according to a Reuters
poll of economists, the bank is expected to cut the benchmark
interest rate to a record low to revive a struggling economy.

    The Bovespa rose as shares of the largest domestic
airline, Gol Linhas Aereas Inteligentes SA, jumped
nearly 6% after the company reported higher demand for its
flights in June, overshadowing losses for Petroleo Brasileiro
 after the state oil company lowered its 2019
production target.
    Colombia's peso slipped after its central bank held
interest rates steady at 4.25% for the fifteenth month running.

    A bright spot was Argentine markets after data showed
economic activity rose for the first time in over a year in May,
a rare boost for President Mauricio Macri as he looks to dig the
country out of a crippling recession ahead of presidential
elections later this year.
 Key Latin American stock indexes and currencies at 2013 GMT:
   Stock indexes           Latest    Daily %
 MSCI Emerging Markets      1048.86    -0.52
 MSCI LatAm                 2863.83     0.12
 Brazil Bovespa           102818.93     0.16
 Mexico IPC                40652.57    -0.69
 Chile IPSA                 4981.08    -0.23
 Argentina MerVal          41952.27     5.18
 Colombia IGBC             12870.87    -0.52
      Currencies           Latest    Daily %
 Brazil real                 3.7734    -0.05
 Mexico peso                19.0707    -0.29
 Chile peso                   694.9     0.16
 Colombia peso               3237.8    -0.68
 Peru sol                     3.297    -0.03
 Argentina peso             43.3300     0.16
 (Reporting by Sruthi Shankar and Agamoni Ghosh in Bengaluru
Editing by Matthew Lewis)
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