November 6, 2018 / 4:14 PM / 9 months ago

EMERGING MARKETS-Latam stocks set to fall amid caution as U.S. midterm vote eyed

    By Aaron Saldanha
    Nov 6 (Reuters) - Latin American stocks were set to fall for
a first session in  six on Tuesday, plagued by caution as
traders watched the progress of the U.S. midterm congressional
election for cues on the direction of trade.   
    The elections could shape the future of U.S. President
Donald Trump's regime and test his tax and trade policies, with
polls expecting the Democratic Party to gain control of the U.S.
House of Representatives, a scenario which caps market
    A legislative impasse due to a divided congress would make
it very difficult for Trump to achieve approval for additional
tax cuts, Arturo Espinosa, an analyst with Santander Mexico
wrote in a note.
    Gabriel Casillas, chief economist and head of research at
Banorte Research wrote that investors were staying bearish, with
their attention focused on the electoral results.    
    MSCI's index of Latin American equities was
1.3 percent lower, hurt by a half a percent fall in Brazil
 amid broad-based weakness. 
    The top loser on the country's Bovespa stock index was
Magazine Luiza SA, down 7.4 percent after third
quarter net income rose less than some investors expected.

    Petroleo Brasileiro SA traded 1 percent lower. A
surge in spending dimmed optimism over a multifold rise in
quarterly net profit which fell short of analysts' estimates.

    In foreign exchange markets, MSCI's index of Latin American
currencies was down 0.4 percent, on track to
weaken for a first session in four. 
    Brazil's real weakened 0.7 percent with traders
feeling President-elect Jair Bolsonaro's plans for pension
reform would not be as rapid and radical as markets initially
    "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. 
    Mexico's peso was rangebound as data showed gross
fixed investment fell 3.4 percent in August, on a month-on-month
    In Argentina, the peso marked time while stocks
 rose in thin trade seen account of Argentine banks being
closed for a holiday.
    Bucking the trend, Colombia's peso firmed to a one
and a half week high.
  Key Latin American stock indexes and currencies at 1538 GMT
 Stock indexes                           daily %     YTD %
                             Latest       change    change
 MSCI Emerging Markets          993.28      0.09    -14.34
 MSCI LatAm                    2738.51     -1.34     -1.85
 Brazil Bovespa               89135.18     -0.52     16.67
 Mexico IPC                   46670.48     -0.31     -5.44
 Chile IPSA                    5229.49     -0.41     -0.41
 Argentina MerVal             31731.17      0.96      5.54
 Colombia IGBC                12229.38      0.08      7.55
 Currencies                              daily %     YTD %
                                          change    change
 Brazil real                    3.7605     -0.94    -11.89
 Mexico peso                   19.8836     -0.01     -0.93
 Chile peso                      678.2      0.07     -9.37
 Colombia peso                 3151.25      0.85     -5.37
 Peru sol                         3.37     -0.15     -3.95
 Argentina peso                35.6200     -0.28    -47.78
 (Reporting by Aaron Saldanha in Bengaluru; Editing by
Bernadette Baum)
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