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Aaron Saldanha

EMERGING MARKETS-Latam FX drops, Brazil's real clocks 8-month closing low

17 May 2019

(Recasts throughout, updates prices, adds quotes by market strategist and broker) By Aaron Saldanha May 17 Latin American currencies softened on Friday against a robust dollar amid rising U.S.-China tensions, with Brazil's real facing intense selling pressure as investors' concerns about growth in Latin America's top economy gathered steam. A commentary in the Chinese Communist Party's People's Daily which said the trade war with the United States will only make China stronger jarred risk appetite globally. Locally, MSCI's index of Latin American currencies fell 0.9%, while its Latin American stocks index eased 1%, with Brazilian assets in focus amid deepening fears of growth slowing. "With rising trade tensions and risk sentiment abroad, and a souring political environment domestically, Brazilian assets have seen a sell-off in key benchmarks," Mauricio Oreng, senior Brazil strategist at Rabobank, wrote in a note. Brazil's real dived 1.3% to a near eight-month closing low. Investors see a greater probability of the country's central bank taking a more supportive policy stance amid the possibility of growth having slowed in 2019's first quarter. "It's a perfect storm for a speculative attack on the real," said a broker in Sao Paulo. "What the market is looking for is the point at which the central bank gets uncomfortable." Economy Minister Paulo Guedes said growth expectations were falling rather than growth itself, blaming fragmented domestic politics and the resulting slow progress of the government's pension reform bill in Congress. Stocks ended little changed as losses among financials and energy stocks counterweighed gains in materials stocks. Common shares and preferred shares of state-run oil firm Petroleo Brasileiro SA (Petrobras) slid 0.8% and 2.3%, respectively, amid lower Brent crude futures. Banco do Brasil SA shed 1.7%. The lender is one of three banks Petrobras has removed from the privatization process of fuel distribution unit Petrobras Distribuidora , four sources told Reuters this week. Shares of miner Vale SA rose 2.8%, with Dalian-traded iron ore futures having hit a record peak earlier in the global day. Investors' optimism toward Brazil has waned recently following a slew of warnings on growth and the slow progress of the pension reform proposal, leading to international investors scaling back exposure to the country. A heavily traded Brazil-focused ETF saw weekly outflows from U.S.-domiciled investors for the first week in five, Lipper estimates for the week ended Wednesday show. The ETF has shed about 10.8% this month. Mexican stocks marked time, while the peso made back some of the of ground lost earlier in the day to weaken 0.2%. U.S. President Donald Trump said his country has reached a deal with Canada to remove tariffs on aluminum and steel, paving the way for similar pact with Mexico. Argentina's peso softened, while stocks fell 1.7% as investors cashed out some chips to lock in gains made over the last three days. Latin American stock indexes and currencies at 2050 GMT Stock indexes daily % Latest change MSCI Emerging Markets 996.39 -1.46 MSCI LatAm 2527.16 -1.01 Brazil Bovespa 89992.73 -0.04 Mexico IPC 43445.62 0.01 Chile IPSA 4925.58 -1.05 Argentina MerVal 33315.70 -1.7 Colombia IGBC 12237.24 -0.31 Currencies daily % change Latest Brazil real 4.1001 -0.01 Mexico peso 19.1604 -0.21 Chile peso 695.7 -0.29 Colombia peso 3320.03 -0.68 Peru sol 3.33 -0.39 Argentina peso (interbank) 44.9800 -0.40 (Reporting by Aaron Saldanha in Bengaluru, Additional reporting by Jamie McGeever in Brasilia and Jose Gomes Neto in Sao Paulo; editing by Jonathan Oatis)

U.S.-China trade gloom casts heavy shadow on European stocks

17 May 2019

European stocks snapped a three-day winning streak on Friday amid global trade jitters after Beijing ratcheted up its war of words with Washington, while the end of Brexit talks between British political parties put a lid on risk sentiment.

EMERGING MARKETS-Latam FX falls, Mexican peso, Brazil's real in focus

16 May 2019

(Updates prices, adds market strategist's quote) By Aaron Saldanha May 16 Most Latin American currencies weakened on Thursday against the dollar, with Mexico's peso in focus following the release of the central bank's outlook, while Brazil's real skidded on growth fears. Mexico's peso softened 0.4% after Banco de Mexico (Banxico) matched most investors' expectations by leaving borrowing costs at 8.25%. The bank cited possible pressure on the peso's exchange rate as a risk for inflation to quicken. More broadly, MSCI's index of Latin American currencies eased 0.2%, while MSCI's Latin American stocks index was 1.3% lower, after hitting a 2019 low. "Banxico believes the near term pickup in inflation is transitory, but its focus on wage increases and cost pressures implies a high level of vigilance and little room to cut rates in 2019," Sacha Tihanyi, TD Securities' deputy head of emerging markets strategy, wrote in a note. Also on Thursday, Mexican President Andres Manuel Lopez Obrador said Mexico received $10 billion in foreign direct investment in the first quarter of 2019, seeking to allay doubts about his economic management and fears over a potential ratings downgrade. Mexican stocks rose 0.2%, largely on gaining financials. Brazil's real dived 1.1% to a more than seven month closing low, while yields on local 10-year bonds rose 11 basis points to 9.01%. Investor sentiment towards Brazil chilled as central bank president Roberto Campos Neto acknowledged there is a "relevant probability" the economy contracted slightly in the first quarter. He also said controlling inflation hinged on the approval and implementation fiscal reforms, with markets delaying investment until uncertainty reduces. Bank of America Merrill Lynch economists cut their Brazilian growth forecasts and changed their interest rate call to predict aggressive policy easing this year. Sao Paulo-traded stocks slid 1.8%, weighed down by losses among financials and materials, as they neared the point at which they began the year. Mining firm Vale SA reversed early gains to slide 3.2%. It told prosecutors in the state of Minas Gerais a dam is at risk of rupturing at its Gongo Soco mine, not far from where another of its dams collapsed in January, resulting in the deaths of more than 230 people. Argentina's peso firmed, while stocks tacked on 2%. Latin American stock indexes and currencies at 2100 GMT Stock indexes daily % Latest change MSCI Emerging Markets 1011.15 -0.47 MSCI LatAm 2553.00 -1.33 Brazil Bovespa 90024.47 -1.75 Mexico IPC 43442.49 0.24 Chile IPSA 4977.75 -0.55 Argentina MerVal 33892.17 2.03 Colombia IGBC 12275.61 0.22 Currencies daily % change Latest Brazil real 4.0450 -0.22 Mexico peso 19.1190 -0.38 Chile peso 693.7 -0.42 Colombia peso 3297.5 -0.45 Peru sol 3.317 0.00 Argentina peso (interbank) 44.7300 0.60 (Reporting by Aaron Saldanha in Bengaluru; editing by Grant McCool)

European stocks climb as deal talk outweighs trade fears

16 May 2019

European shares reversed course to end in positive territory on Thursday, with deal-making news in Germany helping to prop up the pan-European benchmark as it overcame fears of an escalation in the U.S.-China trade war. | Video

EMERGING MARKETS-Latam FX softer, Brazil's real & Bovespa weaken on growth fears

16 May 2019

By Aaron Saldanha May 16 Latin American currencies softened on Thursday against a dollar that was strengthened by trade war fears, while a Latin American stocks benchmark fell as losses in index heavyweight Brazil overcame gains on other countries' exchanges. Traders this week have generally scaled back exposure to Latin American countries at risk of being affected by a prolonged U.S.-China trade war, lifting the dollar, which was also supported on the day by better than expected U.S. homebuilding data. MSCI's index of Latin American currencies fell 0.2%, while index of Latin American stocks slid 0.6%. Brazil's real pierced through the 4 reais per dollar mark for the second day in a row. It fell as much as 0.6% to a seven-and-a-half-month low, while yields on local 10-year bonds inched up three basis points to 8.93%. Investor sentiment towards Brazil cooled, with the central bank's president acknowledging there is a "relevant probability" that Latin America's top economy contracted slightly in the first quarter. Roberto Campos Neto also said controlling inflation hinged on the approval and implementation fiscal reforms, with markets delaying investment until uncertainty reduces. Investors have been on the look-out for the passage of a proposal to reform Brazil's giant pension system, with the currency and equities recently swinging broadly in lock-step with news on the proposal's progress. Brazilian stocks dropped 0.7%, weighed on largely by losses among financials and consumer discretionary stocks. The Bovespa was on course to clock this year's lowest closing level. Mining firm Vale SA was among the Bovespa's few gainers, rising 0.9%. Dalian-traded iron ore futures hit a record peak earlier in the global day. The Mexican peso softened 0.2%, while stocks edged up. Chile's peso and its stocks marked time, as did Colombia's peso. Colombian stocks rose 0.8%, with oil firm Ecopetrol 1.3% higher, against a backdrop of rising Brent crude futures. Argentina's stocks benchmark tacked on 1%, largely on gains among financials. Latin American stock indexes and currencies at 1432 GMT Stock indexes daily % Latest change MSCI Emerging Markets 1012.63 -0.33 MSCI LatAm 2572.76 -0.57 Brazil Bovespa 91010.20 -0.67 Mexico IPC 43378.66 0.09 Chile IPSA 5006.91 0.03 Argentina MerVal 33555.83 1.02 Colombia IGBC 12349.37 0.82 Currencies daily % change Latest Brazil real 4.0170 -0.53 Mexico peso 19.0897 -0.22 Chile peso 692.5 -0.25 Colombia peso 3283.68 -0.03 Peru sol 3.316 0.03 Argentina peso (interbank) 45.0300 -0.07 (Reporting by Aaron Saldanha in Bengaluru Editing by Alistair Bell)

EMERGING MARKETS-Latam assets broadly fall as growth fears weigh

15 May 2019

(Updates prices, adds market strategist's quote on Mexican peso) By Aaron Saldanha May 15 A Latin American stocks benchmark fell on Wednesday, while most Latin American currencies weakened against the dollar as surprisingly weak data out of China dented risk sentiment and overcame optimism arising out of news of the United States planning to delay a decision on tariffs on auto imports. Data showing China's industrial output growth in April slowed more than expected set a negative tone overnight for Latin American markets. The world's second-largest economy is a key destination for exports of Latin American resources. The pall cast by the Chinese data was partially brightened by U.S. officials saying President Donald Trump is expected to delay a decision on tariffs on imported cars and parts by up to six months. MSCI's Latin American stocks index fell 0.7% on the back of losses among stocks in index heavyweight Brazil. MSCI's index of Latin American currencies dipped 0.3%. Sao Paulo-traded stocks dropped 0.5%, with most sectors declining. Kroton Educacional SA and planemaker Embraer dived 5.2% and 4.2%, respectively, after each firm's first-quarter results left their investors with limited cause for optimism. The two stocks were among the biggest losers on the Bovespa, which fell under the 92,000-point mark to end at its lowest closing level since early 2019. Brazil's real weakened 0.6%, while yields on local 10-year bonds rose 9 basis points to 8.90%. Goldman Sachs economists cut their economic growth forecasts for Brazil, predicting Latin America's top economy shrank in the first quarter this year and will struggle to grow much faster in 2019 than it did in each of the last two years. Alberto Ramos, Goldman Sachs's head of Latin American economic research, wrote in a note that progress towards fiscal consolidation remains "quintessential to anchor market sentiment" and to leverage what has been "so far a very shallow and disappointing recovery." Mexican stocks dipped 0.2%, although the peso firmed 0.5%, a day before a Banco de Mexico (Banxico) review of borrowing costs. Many investors expect it to leave the key rate at 8.25%. "Banxico will cut rates in H2 (2019) but we continue to expect that slightly later in the year than the summer move implied by the curve," Christian Lawrence, senior market strategist at Rabobank, wrote in a note. "We would also argue that the door is still open for a hike should the peso slump dramatically ... we expect the USD/MXN pair to continue trading an 18.90 to 19.50 range in the next 1-3 months." Chile's peso edged firmer, underpinned by stronger prices of copper, the country's top export. Argentina's stocks rose 2.2%, while the peso marked time. Argentina consumer prices rose by 3.4% in April, data showed, decelerating from a month earlier and providing some welcome relief to President Mauricio Macri as he looks to rein in stubbornly high inflation in an election year. Latin American stock indexes and currencies at 2108 GMT Stock indexes daily % Latest change MSCI Emerging Markets 1,015.97 0.2 MSCI LatAm 2,587.50 -0.72 Brazil Bovespa 91436.98 -0.71 Mexico IPC 43338.82 -0.21 Chile IPSA 5005.24 -0.27 Argentina MerVal 33218.06 2.18 Colombia IGBC 12248.63 -0.35 Currencies daily % change Latest Brazil real 4.0009 -0.13 Mexico peso 19.0544 -0.04 Chile peso 690.8 0.01 Colombia peso 3282.75 0.00 Peru sol 3.317 0.15 Argentina peso (interbank) 44.9600 0.02 (Reporting by Aaron Saldanha in Bengaluru Editing by Chris Reese)

Auto-stocks drive European shares higher on tariff delay hopes

15 May 2019

European stocks surged late in Wednesday's session to wipe away early losses after U.S. officials said President Donald Trump was expected to delay auto tariffs by up to six months.

EMERGING MARKETS-Latam stocks, FX dip, growth concerns weigh on Brazil

15 May 2019

By Aaron Saldanha May 15 Latin American currencies broadly softened against the dollar on Wednesday and an index of Latin American stocks slid as surprisingly weak data out of China dented risk sentiment. Data showed China's industrial output growth in April slowed more than expected, reflecting the effects of the U.S.-China trade war. The world's second-largest economy is a big destination for Latin American resource exports. MSCI's index of Latin American currencies fell 0.3%, while its Latin American stocks index was 1.2% lower, after hitting its lowest level since the start of the year. The indexes recovered a little lost ground after three U.S. administration officials told Reuters that President Donald Trump is expected to delay a decision on tariffs on imported cars and parts by up to six months. Brazil's real weakened 0.6%, while yields on local 10-year bonds rose 3 basis points to 8.84%. Goldman Sachs economists cut their economic growth forecasts for Brazil, predicting Latin America's top economy shrank in the first quarter this year and will struggle to grow much faster in 2019 than it did in each of the last two years. Alberto Ramos, Goldman Sachs's head of Latin American economic research, wrote in a note that progress towards fiscal consolidation remains "quintessential to anchor market sentiment" and leverage what has been "so far a very shallow and disappointing recovery." Investors have been closely watching the progress of a proposal to reform Brazil's bloated pension system, which they feel is critical to bolster the economy by trimming a yawning fiscal deficit. Brazilian stocks dropped 1.2%, weighed by losses across the board. Planemaker Embraer and Kroton Educacional SA dived 4.2% and 6.7%, respectively, after each firm's first-quarter results left their investors with limited cause for optimism. Cia Siderurgica Nacional fell 1.5%. It said a spillage in the steelworks of its Volta Redonda plant affected at least 20 employees and stopped production in the affected area. Common shares and preferred shares of state-run oil firm Petroleo Brasileiro SA (Petrobras) fell 1.1% and 0.9%, respectively. Mexico's peso softened marginally, while stocks slid 0.9%. Communication services shares contributed handily to the benchmark's decline. Argentina's peso fell, while stocks rose 1.3% on gains among financials. Colombia's peso declined 0.1%, as did local stocks . Latin American stock indexes and currencies at 1409 GMT Stock indexes daily % Latest change MSCI Emerging Markets 1015.73 0.12 MSCI LatAm 2574.79 -1.2 Brazil Bovespa 90995.11 -1.19 Mexico IPC 43030.62 -0.92 Chile IPSA 4992.90 -0.52 Argentina MerVal 32938.00 1.31 Colombia IGBC 12274.41 -0.14 Currencies daily % Latest change Brazil real 4.0022 -0.67 Mexico peso 19.1637 -0.07 Chile peso 693 -0.30 Colombia peso 3293.55 -0.15 Peru sol 3.328 -0.18 Argentina peso (interbank) 45.2500 -0.62 (Reporting by Aaron Saldanha in Bengaluru Editing by Susan Thomas)

EMERGING MARKETS-Latam assets rise as chilly U.S.-China trade ties appear to thaw

14 May 2019

(Recasts throughout, updates prices, adds market strategist's quote) By Aaron Saldanha May 14 Most Latin American stock markets rose on Tuesday, gaining back some ground lost in the previous session, while Latin America's currencies firmed against the dollar as traders raised their risk exposures after U.S. President Donald Trump downplayed the U.S.-China trade war. Trump said talks had not collapsed, while a spokesman for China's foreign ministry said the countries agreed to continue talks trade, aiding a recovery in risk sentiment after it slumped on Monday. MSCI's index of Latin American stocks rose 0.8%, while its Latin American currencies index gained 0.4%. Mexican stocks gained 0.7%, and the peso firmed 0.4%. Banco de Mexico (Banxico) is seen holding its key interest rate steady at 8.25% on Thursday amid signs of economic weakness and an acceleration of inflation in April, a Reuters poll showed. "The risk-off nature of financial markets this week will also potentially sensitize the nature of the market reaction to any hypothetical appearance of dovishness coming from Banxico, despite the fact Mexico's peso has held in reasonably well," Sacha Tihanyi, TD Securities' deputy head of emerging markets strategy, wrote in a note. Brazilian stocks added 0.4%, aided by gains among consumer staples and materials. The real firmed 0.5%. The government and central bank said Brazil's economic and fiscal health was deteriorating rapidly, as yet another economic indicator suggested the country may be sliding closer toward recession. The economy may have contracted slightly in the first quarter, according to minutes from the bank's latest policy meeting. JBS SA surged 8.4% as its executives said the world's top meatpacker is poised to reap the benefits from additional demand after an African swine fever outbreak in China. Vale SA gained 0.3% , following Monday's 4.1% drop. The miner is considering doubling its Carajas Serra Sul iron ore mine's output after 2020. Preferred shares of Azul declined 4%. The airline made a new attempt on Monday to buy some of bankrupt Avianca Brasil's most coveted routes, offering $145 million and reversing a decision not to participate. Stocks in Argentina gained 0.7% on rising risk sentiment, while the country's peso firmed. Chilean stocks climbed 1%, while the peso rose after copper prices rebounded. The industrial metal is Chile's top export. Latin American stock indexes and currencies at 2057 GMT Stock indexes daily % Latest change MSCI Emerging Markets 1014.48 -0.2 MSCI LatAm 2606.37 0.78 Brazil Bovespa 92092.44 0.4 Mexico IPC 43431.53 0.67 Chile IPSA 5018.93 0.98 Argentina MerVal 32510.83 0.65 Colombia IGBC 12291.59 -0.58 Currencies daily % change Latest Brazil real 3.9746 0.02 Mexico peso 19.1541 0.36 Chile peso 690.9 0.36 Colombia peso 3288.6 0.44 Peru sol 3.322 0.15 Argentina peso (interbank) 44.9300 0.56 (Reporting by Aaron Saldanha in Bengaluru; Editing by Sandra Maler)

European stocks regain ground, hoping for smoother U.S.-China trade

14 May 2019

European shares gained on Tuesday, recovering most of the previous session's losses, as optimistic comments from Washington and Beijing helped soothed investors' fears about the top two economies' intensifying trade spat. | Video

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