September 18, 2019 / 7:52 PM / a month ago

EMERGING MARKETS-Latam assets weaken amid doubts on further U.S. rate cuts

 (Recasts following Federal Reserve decision; updates prices)
    By Sruthi Shankar
    Sept 18 (Reuters) - Latin American currencies and stocks
lost steam on Wednesday after the U.S. Federal Reserve lowered
interest rates as expected, but doubts about further rate cuts
prompted investors to cut exposure to risky assets.
    With the U.S. dollar broadly strengthening after the release
of the Fed's policy statement, the Brazilian real led
losses among the regional currencies with a 0.7% decline ahead
of a rate decision from Brazil's central bank.
    The Fed cut rates by 25 basis points, its second this year,
citing global risks and "weakened" business investment and
exports.
    New projections also showed policymakers at the median
expected rates to stay within the new range through 2020,
driving investors to cut bets on further U.S. rate cuts. The
projections are shown as dots on a graphic.
    "These dots emphasize the characterization of the recent
cuts as a "mid-cycle adjustment," Thomas Simons, senior money
market economist at Jefferies, wrote in a note. "Even the most
dovish policymakers have dots that are no lower than 1 rate cut
away from the current level."
    Emerging market assets have benefited this year as major
central banks moved to ease monetary policy in the wake of a 
bruising trade war between the United States and China that has
put the world economy at the risk of a recession.
    Brazil's central bank, Copom, is expected to cut its
benchmark interest rate to a new low on Wednesday, according to
a Reuters poll of economists, as it tries to boost a lackluster
economic recovery and prevent inflation from falling too far
below target.
    Since Copom cut rates at the end of July, central bank
president Roberto Campos Neto has said several times that low
inflation and a "benign" outlook provide room for further policy
"adjustment."
    Stock markets took a beating. Brazil's Bovespa,
Mexico's IPC and Colombian shares were down
between 0.3% and 1%, while MSCI's index of Latin American stocks
 fell 0.6%.
    Mexico's peso edged lower, while the Colombian peso
 outperformed its regional peers even as oil prices
extended losses for a second day after Saudi Arabia said it
would quickly restore full production following last weekend's
attacks on its facilities and as U.S. crude stockpiles rose
unexpectedly.
    Markets in Chile were shut for a public holiday. 

  Latin American stock indexes and currencies at 1922: 
        Stock indexes                  Latest       Daily %
                                                     change
 MSCI Emerging Markets                    1020.30        0.13
 MSCI LatAm                               2704.67        -0.6
 Brazil Bovespa                         104252.09       -0.35
 Mexico IPC                              42987.52       -1.06
 Chile IPSA                               5072.93        0.06
 Argentina MerVal                        29709.77      -1.462
 Colombia IGBC                           12936.40       -0.53
                                                             
           Currencies                  Latest       Daily %
                                                     change
 Brazil real                               4.1056       -0.69
 Mexico peso                              19.4150       -0.27
 Chile peso                                713.55        0.00
 Colombia peso                             3372.2        0.29
 Peru sol                                    3.35       -0.36
 Argentina peso (interbank)               56.5150       -0.03
                                                   
     

 (Reporting by Sruthi Shankar in Bengaluru
Editing by Leslie Adler)
  
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