December 17, 2018 / 1:49 PM / 6 months ago

EMERGING MARKETS-Mexico's peso rises after govt budget; Brazil stocks fall

    By Agamoni Ghosh
    Dec 17 (Reuters) - The Mexican peso gained against a soft
dollar on Monday aided by positive investor reaction to the new
leftist government's debut budget, while stocks in Brazil
slipped dragged by declines in shares of financial companies. 
    The peso was half a percent higher as investors
positively reacted to the new budget with banks describing the
plans to keep a lid on spending as credible and helpful to
market sentiment.
    The budget is a major test of President Andres Manuel Lopez
Obrador's economic credibility, which was shaken when he
scrapped a partly-built $13 billion airport on the basis of a
referendum that was widely panned as illegitimate.
    "The budget is a positive surprise for the market," analysts
at Citigroup said earlier on Monday.
    "Furthermore, rating agencies will be kept at bay for at
least the next six months or so, as it would take meaningful
slippage versus the plan to trigger downgrades," they added. 
    The Brazilian real snapped out of early losses to
climb 0.2 percent against the dollar, which slipped as traders
were cautious before the U.S. Federal Reserve's policy meeting
this week, where interest rates are almost certain to rise.
    "With the December rate hike of 25bps fully priced in, the
market's attention has shifted to the Fed's policy path in
2019," said Rabobank analysts in a note. 
    The greenback has substantially gained against its emerging
counterparts this year until a change in the Fed's tone in
November indicating a rate-cycle pause sometime in 2019. 
    Stocks on Sao Paulo's main index fell 0.2 percent
driven by declines in shares of financial companies with Itau
Unibanco Holding  falling 0.8 percent.  
    The biggest decliner on the index was Brazil's largest
airline, Gol Linhas Aereas Inteligentes after the
company announced it will have to scrap the proposed takeover of
mileage subsidiary Smiles Fidelidade SA.
     Despite the index's fall, substantial gains were recorded
by aircraft manufacturer Embraer, which climbed 5
percent after announcing it was selling 80 percent of its
commercial aviation business to Boeing.
    Key Latin American stock indexes and currencies at 1330 GMT:
 Stock indexes                             daily %     YTD %
                               Latest       change    change
 MSCI Emerging Markets            972.39      0.05     -16.1
 MSCI LatAm                      2542.56     -0.25     -9.87
 Brazil Bovespa                 87357.84      -0.1     14.34
 Mexico IPC                            -         -         -
 Chile IPSA                      5150.66     -0.26     -0.26
 Argentina MerVal                      -         -         -
 Colombia IGBC                         -         -         -
 Currencies                                daily %     YTD %
                                            change    change
 Brazil real                      3.9068     -0.11    -15.19
 Mexico peso                     20.1301      0.51     -2.14
 Chile peso                       682.15      0.12     -9.90
 Colombia peso                   3190.09      0.10     -6.52
 Peru sol                           3.34      0.21     -3.08
 Argentina peso (interbank)      38.1200      0.21    -51.21

 (Reporting by Agamoni Ghosh in Bengaluru; 
Additional reporting by Michael O'Boyle and Rodrigo Campos
Editing by Nick Zieminski)
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