December 17, 2018 / 10:09 PM / a year ago

EMERGING MARKETS-Mexican peso leads Latam currency gains; stocks slide

 (Updates prices, adds Fitch analyst's comment)
    By Aaron Saldanha
    Dec 17 (Reuters) - Latin American currencies mostly firmed
against a soft dollar on Monday, with Mexico's peso clocking its
best day in nearly three weeks and stocks across Latin America
fell as they were sucked into a global equities sell-off. 
    The dollar faltered with more market participants expecting
a cautious outlook from the U.S. Federal Reserve at the end of
its two-day meeting on Wednesday. A rate hike is largely priced
in. Among equities, broad stock declines in Europe and the
United States dragged stock markets lower.
    Mexico's peso firmed about 0.8 percent on investor
relief that the new leftist government's proposed budget was
more conservative than some expected. It seemed to buy Mexico
some leeway with rating agencies.      
    "The headline budget numbers look fine, continued fiscal
discipline and a primary surplus, which you can't really argue
with from a rating perspective," James McCormack, global head of
sovereign ratings at Fitch, told Reuters.
    Investors in Latin America's second largest economy had been
worried that the expenditure arising out of promises of social
benefits by President Andres Manuel Lopez Obrador would put
pressure on Mexico's sovereign debt rating.
    The cancellation of a partly built airport project and
reform proposals for mining and banking commissions had hit
investor sentiment in the last few months.

    While Mexican stocks fell as they tracked global
peers, yields on local 10-year government bonds slid
deeper below the 9 percent mark on Monday. 
    The difference in yield, or spread, between those bonds and
U.S. 10-year bonds fell below 600 basis points
during the session. It last closed below that difference about a
month ago.     
    Brazil's real firmed for the first session in three
but its stocks benchmark slid 1.2 percent, as losses
among financial stocks took a heavy toll.
    Stock exchange operator B3 SA fell 2 percent,
matching the decline in lender Banco Bradesco SA. 
    Régis Chinchila, an analyst at Terra Investimentos, said
investors have no new reason to keep buying at the end of the
year and some were starting to unwind positions or take profits,
 especially among financials.
    Colombia's peso firmed half a percent while its
stocks fell 1.4 percent.
    The Chilean peso slid 0.6 percent; stocks
 dropped 1.1 percent.
    Argentinean stocks were hit especially hard by the
weak sentiment prevalent on Monday, dropping 3.9 percent to
their lowest closing level in nearly a month.   
    Latin American stock indexes and currencies at 2141 GMT:
 Stock indexes                           daily %     YTD %
                             Latest       change    change
 MSCI Emerging Markets          967.82     -0.42    -16.46
 MSCI LatAm                    2510.41     -1.52    -11.23
 Brazil Bovespa               86399.68      -1.2     13.09
 Mexico IPC                   40340.51     -2.35    -18.26
 Chile IPSA                    5105.15     -1.14     -1.14
 Argentina MerVal             29888.02     -3.93     -0.59
 Colombia IGBC                11396.00     -1.37      0.22
 Currencies                              daily %     YTD %
                                          change    change
 Brazil real                    3.8994     -0.18    -15.03
 Mexico peso                   20.0720      0.80     -1.86
 Chile peso                     687.81     -0.71    -10.64
 Colombia peso                 3178.25      0.48     -6.17
 Peru sol                        3.339      0.24     -3.05
 Argentina peso                38.2300     -0.08    -51.35

 (Reporting by Aaron Saldanha in Bengaluru, Additional reporting
by Marc Jones in London and Paula Arend Laier in Sao Paulo;
editing by Grant McCool)
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