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Bonds News

EMERGING MARKETS-Brazil's real outperforms Latam FX on improved GDP forecast

    * Brazil govt sees 2020 GDP falling less than previously
expected
    * Peru names Francisco Sagasti as interim president
    * Chile stocks down more than 1% 

    By Shriya Ramakrishnan
    Nov 17 (Reuters) - Brazil's real gained on Tuesday as an
improved outlook for growth in Latin America's largest economy
boosted risk appetite, while most other regional currencies
weakened on concerns about the economic damage of the pandemic. 
    The real strengthened 0.7% to the dollar, pushing
MSCI's index for Latin American currencies up
0.3%. 
     Brazil's economy ministry on Tuesday raised its 2020
economic growth forecast to a contraction of 4.5% from an
earlier estimate of 4.7%, citing upward revisions to third
quarter activity.
    The real has lost around 30% of its value against the dollar
this year, making it one of the worst-performing currencies in
the emerging market space, as it has been hit hard by interest
rates being slashed to a record low and growing concern over
Brazil's fiscal health.
    "Rebounding capital flows to Latam would be a particular
boon to Brazil asset markets," Ilya Gofshteyn, senior EM Macro
strategist at Standard Chartered wrote in a note.
    "There is evidence that this process is already under way,
and the clearing of political hurdles in November (municipal
elections) and February 2021 (congressional leadership contests)
would open the door to further recovery."
    Equities and currencies across the rest of the region
dipped, as a continued spike in coronavirus cases around the
world and doubts about the timeline of vaccine distribution
dented sentiment.
    Stocks in Chile were down more than 1%, and the
peso dropped 0.3%, tracking weakness in prices of copper,
the country's largest export item.
    Investors were also awaiting Chile's third-quarter economic
growth figures, due out on Wednesday. 
    Mexico's peso weakened 0.7%, making it the worst
performer among Latam currencies, while Colombia's peso
was up slightly during the day.    
    Peru's sol rose sharply from record-low levels after
centrist legislator Francisco Sagasti was elected as the
country's interim president.
    Sagasti will be Peru's third president in a week, after the
departures of Manuel Merino and Martin Vizcarra, and now faces
the challenge to bring stability to the Andean nation which was
already hard hit by COVID-19 and heading for its worst economic
contraction in a century. 
    "It's hard to say how stable the Peruvian political
situation will be as recent stress has been largely driven by
street protests, which are notoriously hard to predict," said
Gustavo Rangel, chief economist, LATAM, at ING.
    "Initial signs appear positive, for a calmer transition, but
I'd say it is still too soon to bet on a smooth transition."

    Key Latin American stock indexes and currencies:
    
                                Latest    Daily % change
 MSCI Emerging Markets           1199.84           -0.27
                                          
 MSCI LatAm                      2130.32           -0.12
                                          
 Brazil Bovespa                105871.51           -0.52
                                          
 Mexico IPC                            -               -
                                          
 Chile IPSA                      3999.44           -1.19
                                          
 Argentina MerVal               50663.22          -0.825
                                          
 Colombia COLCAP                 1223.68            1.14 Currencies              Latest    Daily % change
 Brazil real                      5.3992            0.73
                                          
 Mexico peso                     20.3797           -0.66
                                          
 Chile peso                        767.7           -0.29
                                          
 Colombia peso                   3631.61            0.11
 Peru sol                         3.6337            0.80
                                          
 Argentina peso (interbank)      80.0100           -0.05
                                          
 

 (Reporting by Shriya Ramakrishnan in Bengaluru
Editing by Susan Fenton)
  
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