December 19, 2018 / 9:58 PM / a month ago

EMERGING MARKETS-Latam FX, stocks record minor gains, Fed tarnishes sentiment

 (Recasts; updates prices, market activity and comments)
    By Aaron Saldanha
    Dec 19 (Reuters) - Latin American stocks and currencies rose
on Wednesday, but gains narrowed after the U.S. Federal Reserve
disappointed investors when it issued a more aggressive outlook
for rate hikes in 2019 than many had expected.    
    The Fed hiked borrowing costs, in line with market
participants' expectations, but then Fed Chairman Jerome
Powell's comments in a news conference prompted a sell-off on
equity markets.
    All three major U.S. stock indexes slid at least 1.5
percent. MSCI's index tracking Latin American stocks
 had been trading as much as 2.4 percent higher
before the Fed's decision but ended up just 0.2 percent.
    Igor Lima, a partner at Galt Capital, said investors had
hoped the Fed would adopt a more moderate stance on future
interest rate hikes.
    "But he made only a small adjustment in expectations...At
the same time, Powell suggested he wanted to keep up the pace of
bond sales, which also weighed."
     Brazil's Bovespa stocks benchmark reversed course
to drop 1.1 percent as losses across the board weighed. The real
 managed to hold on to some of its gains, firming 0.4
percent.   
    Colombia's peso and its main stocks index
slid 0.4 percent, while in Chile, the peso softened 0.1
percent, matching the dip in local stocks.  
    Mexican shares also pared gains but still managed to
notch a 1.2 percent rise for the day. The peso dipped 0.2
percent.  
    Implied volatility used in pricing options aimed to protect
against or bet on swings in the peso has fallen in recent days,
after the 2019 budget proposal was more conservative than
expected.
    Data accessed on Refinitiv Eikon showed the peso's one-week
implied volatility slid to a near two-month trough.
Mexico's central bank is expected to hike borrowing costs on
Thursday to their highest in over a decade.
    Volatility had soared after then President-elect Andres
Manuel Lopez Obrador's administration canceled an airport that
was under construction. Investor sentiment grew more gloomy
still on proposals to cap or eliminate certain banking
commissions and more tightly regulate concessions granted for
mining.
          
     Key Latin American stock indexes and currencies at 2134 GMT
    
 Stock indexes                           daily %     YTD %
                             Latest       change    change
 MSCI Emerging Markets          967.65      0.48    -16.47
                                                  
 MSCI LatAm                    2526.72      0.16    -10.66
                                                  
 Brazil Bovespa               85673.52     -1.08     12.14
                                                  
 Mexico IPC                   41388.28      1.15    -16.14
                                                  
 Chile IPSA                    5109.92     -0.14     -0.14
                                                  
 Argentina MerVal             29968.28      0.64     -0.32
                                                  
 Colombia IGBC                11318.22     -0.38     -0.46
                                                  
                                                          
 Currencies                              daily %     YTD %
                                          change    change
                                Latest            
 Brazil real                    3.8977     -0.68    -14.99
                                                  
 Mexico peso                   20.1110     -0.19     -2.05
                                                  
 Chile peso                      689.8      0.00    -10.89
                                                  
 Colombia peso                 3217.27     -0.43     -7.31
 Peru sol                        3.351     -0.12     -3.40
                                                  
 Argentina peso                38.3600     -0.18    -51.51
 (interbank)                                      
                                                  
 
    
 (Reporting by Aaron Saldanha in Bengaluru and Paula Arend Laier
in Sao Paulo; Editing by David Gregorio)
  
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