November 6, 2018 / 10:34 PM / 13 days ago

EMERGING MARKETS-Latam stocks, currencies drop as U.S. election uncertainty weighs

    By Aaron Saldanha
    Nov 6 (Reuters) - Latin American stocks snapped a
five-session winning run on Tuesday as market participants
waited for the results of the U.S. midterm congressional
elections to clarify risks faced by emerging markets.
    Polls and markets generally expect the Republicans to retain
control of the Senate but the Democratic Party to gain control
of the U.S. House of Representatives. However, a Republican win
for the house would likely boost market sentiment.
    A legislative impasse on account of a divided Congress would
make it difficult for U.S. President Donald Trump to achieve
approval for additional tax cuts, Arturo Espinosa, an analyst
with Santander Mexico wrote in a note.
    MSCI's index of shares in Latin America
declined 1.7 percent, hurt by a 1 percent fall in Brazil
and Mexico.
    Meanwhile, the MSCI index of currencies in the region
 fell 0.8 percent, largely weighed down by a
weakening of Brazil's real. 
    The top loser on Brazil's Bovespa stock index, Magazine
Luiza SA, dropped more than 8 percent. 
    The firm's management said it would focus more on absolute
growth rather than profit margins in the coming quarters.

    Petroleo Brasileiro SA was also among the top
losers, down 3.4 percent. A surge in spending dimmed optimism
over a multifold rise in quarterly net profit.     
    The real weakened 0.9 percent with traders feeling
President-elect Jair Bolsonaro's plans for pension reform would
not be as rapid and radical as markets initially expected.

    "The age limits he proposed may lead the market to think
that his version of reform will be softer than (current
President Michel) Temer's and temper some enthusiasm in the BRL
after a strong rally," wrote Dirk Willer, managing director and
head of emerging market strategy at Citigroup, in a note.
    Argentina's peso marked time while stocks
fell 1.5 percent, the most in more than a week. 
    Data showed industrial output fell by 11.5 percent in
September versus the same month last year, the most dramatic
drop in more than 16 years, attesting to the economic paralysis
gripping the inflation-racked country. 
    Colombia's peso gave up ground gained earlier in the
session to weaken slightly, while the country's stocks
were little changed.
    Mexico's peso was not swept up by the regional
weakness, with local analysts pegging the currency's resilience
to a fall it saw last week to more than four-month lows after
the incoming government canceled an already started airport
project.

    
    Key Latin American stock indexes and currencies at 2212 GMT
    
 Stock indexes                           daily %     YTD %
                             Latest       change    change
 MSCI Emerging Markets          992.27     -0.01    -14.35
                                                  
 MSCI LatAm                    2729.48     -1.66     -3.49
                                                  
 Brazil Bovespa               88668.92     -1.04     16.06
                                                  
 Mexico IPC                   46328.35     -1.04     -6.13
                                                  
 Chile IPSA                    5221.93     -0.55     -0.55
                                                  
 Argentina MerVal             30973.55     -1.45      3.02
                                                  
 Colombia IGBC                12219.21         0      7.46
                                                  
                                                          
 Currencies                              daily %     YTD %
                                          change    change
                                Latest            
 Brazil real                    3.7601     -0.08    -11.88
                                                  
 Mexico peso                   19.7050      0.10     -0.03
                                                  
 Chile peso                      679.3      0.00     -9.52
                                                  
 Colombia peso                 3146.63     -0.05     -5.23
 Peru sol                         3.37      0.00     -3.95
                                                  
 Argentina peso                35.6200     -0.28    -47.78
 (interbank)                                      
                                                  
 
    

 (Reporting by Aaron Saldanha in Bengaluru; Editing by Lisa
Shumaker)
  
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