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Susan Mathew

EMERGING MARKETS-Latam FX firm as Fed meets expectations on rate cut signals

19 Jun 2019

(Updates prices) By Susan Mathew June 19 Latin American currencies firmed on Wednesday, with Brazil's real and Mexico's peso reversing session losses to trade higher after the Federal Reserve signaled possible rate cuts of as much as half a percentage point in 2019. Brazil's real was up 0.2%, reversing losses of up to 0.6% logged earlier in the day, while Mexico's peso rose 0.1%, recovering from a decline of as much as 0.4%. Other regional currencies added to their gains. Most Latam stocks followed suit, with Sao Paulo-traded shares erasing losses to trade 0.8% higher, while gains in Mexican and Colombian stocks were bolstered. "As is stands, it (Fed statement) is EM positive and dollar negative," said Christian Lawrence, a senior market strategist at Rabobank. The dollar fell sharply after the Fed held rates unchanged. Chair Jerome Powell reiterated at the press conference that members of the Federal Open Market Committee see a stronger case for rate cuts. This met broad market expectations. The Fed move comes just a day after the European Central Bank chief's sharp dovish turn had fueled hopes of a global wave of central bank stimulus which gave a fillip to markets worldwide. Investors in Brazil's real will now be watching for the local central bank's interest rate decision at market close, which is also expected to signal rate cuts while holding the key rate steady at this meeting. "The combination of weak data and increased pension reform approval chances have led markets to price in almost 70 basis points of cuts in 2019," Morgan Stanley strategists said in a note, adding that a rate cut before September seemed unlikely. "We do think that there might be greater room to cut as the neutral rate continues to decline. So, if the central bank were to approach a potential easing cycle similar to how it has done in the past, then markets could price in an additional 100-125 bp of cuts next year," they said. Meanwhile, gains on Brazil's Bovespa stock index were limited by a 5% slump in Smiles Fidelidade. Gol Linhas Aereas Inteligentes, the country's largest domestic airline, said it had failed to reach an agreement to buy out its independently listed loyalty program, Smiles Fidelidade, after five months of negotiations. Gol shares traded 3% higher, reversing early losses. Stock indexes in Chile and Argentina stayed in the red, although those in Chile cut some losses. Data showed that Argentina's economy contracted 5.8% in the first quarter of 2019 versus the same period a year earlier. Key Latin American stock indexes and currencies at 1930 GMT: Stock indexes Latest Daily pct change MSCI Emerging Markets 1,040.73 1.64 MSCI LatAm 2,815.17 0.72 Brazil Bovespa 100,219.92 0.82 Mexico IPC 43,351.80 0.44 Chile IPSA 5,036.11 -0.09 Argentina MerVal 40,315.88 -0.91 Colombia IGBC 12,548.38 0.82 Currencies Latest Daily % change Brazil real 3.8531 0.16 Mexico peso 19.0918 0.14 Chile peso 692.2 0.58 Colombia peso 3,236.03 0.53 Peru sol 3.329 0.09 Argentina peso (interbank) 43.2800 0.49 (Reporting by Susan Mathew in Bengaluru; Editing by Phil Berlowitz)

European stocks tread water, all eyes on Fed

19 Jun 2019

European stock markets closed little changed on Wednesday in anticipation of the U.S. Federal Reserve policy statement, a day after European Central Bank's dovish calls raised hopes of a more accommodative Fed.

EMERGING MARKETS-Latam FX weaken ahead of Fed, Brazil central bank rate decisions

19 Jun 2019

By Susan Mathew June 19 Most Latin American currencies retreated on Wednesday ahead of the U.S. Federal Reserve's policy statement, while investor anticipation regarding Brazil's central bank meeting added pressure on the real. In its statement expected at 1800 GMT, the U.S. Fed is expected to hold rates but signal a cut next month, with ECB President Mario Draghi's dovish turn on Tuesday fuelling those hopes. Lower U.S. rates bode well for developing world markets as they tend to curb outflows from emerging markets. Regionally, the real fell 0.3% to 3.872 per dollar amid rising bets that deteriorating economic indicators could push the Brazil's Monetary Policy Committee to cut rates soon. At Wednesday's meeting, the bank is expected to keep rate unchanged. The statement is expected at market close. "I think the real will weaken on the Fed meeting today," SEB's Chief EM Strategist, Per Hammarlund, told the Reuters Global Markets Forum. "But as global growth concern subsides, it should stay below 4 this year, even if the central bank were to cut later this year - which is not yet my base-case, but I am starting to increase the likelihood," he said. "Pension reform approval is looking increasingly likely in the fall. I don't think markets will run away already now on the prospect for pension reform." Ahead of a market holiday on Thursday, Brazil stocks rose 0.2% as a rise in iron ore and copper prices aided a climb in material stocks. Gol Linhas Aereas Inteligentes slid to the bottom of the index after the airline said it failed to reach an agreement on a corporate restructuring of its subsidiary, loyalty program Smiles Fidelidade SA. In Mexico, the peso slipped 0.2%. SEB's Hammarlund said anemic growth, unpredictable policy making by President Andres Manuel Lopez Obrador, and volatile relations with the United States would keep a lid on Mexican asset prices. "(U.S. President Donald) Trump will not give Mexico a free ride. If investors signal a growing confidence in Mexico, it will be an opportunity for Trump to demand that Mexico does more to stem the flow of migrants," he said. "The best I am hoping for with Mexico is somehow muddling through. Even if Trump were to drop his focus on Mexico and the wall (unlikely), AMLO's expansive fiscal policy risks undermining the budget and thus could make investors and rating agencies worried." The Chilean peso and the Peruvian sol eked out gains. Key Latin American stock indexes and currencies at Stock indexes Latest Daily % change MSCI Emerging Markets 1037.74 1.35 MSCI LatAm 2784.95 -0.36 Brazil Bovespa 99242.48 -0.16 Mexico IPC - - Chile IPSA - - Argentina MerVal - - Colombia IGBC - - Currencies Latest Daily % change Brazil real 3.8725 -0.34 Mexico peso 19.1602 -0.22 Chile peso 694.1 0.30 Colombia peso 3256.05 -0.09 Peru sol 3.3268 0.30 Argentina peso - - (interbank) (Reporting by Susan Mathew in Bengaluru Additional reporting by Aaron Jude Saldanha Editing by Sonya Hepinstall)

EMERGING MARKETS-Latam stocks, FX rise; Argentine stocks scale record high

18 Jun 2019

(Updates prices) By Susan Mathew June 18 Latin American stocks and currencies surged on Tuesday with a dovish boost from the European Central Bank and positive headlines from the U.S.-China trade tensions boosting sentiment. MSCI's index of Latin American stocks jumped 2%, while its index of regional currencies rose for the first time in four sessions, up 0.7% as regional currencies firmed against a steady dollar. Ahead of a U.S. Federal Reserve policy meeting outcome on Wednesday, when the bank is expected to lay the groundwork for a rate cut, ECB President Mario Draghi hinted at the possibility of new rate cuts. This, along with news that China and the United States are rekindling trade talks after a lull ahead of a meeting between Presidents Donald Trump and Xi Jinping at the G20 summit later this month, buoyed markets globally. Regional assets joined the rally with Brazil stocks rising 1.6% to hit a three-month high. Petrochemical company Braskem cut early losses to trade 4.7% higher. A Brazilian judge on Tuesday granted bankruptcy protection to the company's controlling shareholder Odebrecht, and included Braskem in a list of subsidiaries that creditors are not allowed to sell shares in. The real currency firmed 0.7% ahead of the Brazilian central bank's rate meeting on Wednesday, when it is expected to keep its key lending rate on hold. Returning from a three-day weekend, Argentine stocks rose about 2% and scaled an all-time high before trading 0.8% higher, while the currency rose more than 1%. Mexican stocks rose 0.4%, breaking a three-day losing run. The peso traded steady a day after rating agency Moody's had flagged risks from state oil firm Pemex and unpredictable policymaking by its government. A rise in crude oil prices helped Colombian assets. The oil- exporting country's currency rose almost 1%, while stocks rose 1.7% to an over four-week high, with state oil firm Ecopetrol up 2.3%. Copper-exporting Chile's peso rose after four straight sessions of losses. Copper prices hit three-week highs on Tuesday on trade optimism. Santiago-traded stocks rose 0.1%. Chile President Sebastián Piñera said on Tuesday the government will accelerate a $4 billion infrastructure program this year to revive the country's slow-growing economy. The labor minister, Nicolás Monckeberg, also said the government will push pension reform plans through Congress with "extreme urgency." Key Latin American stock indexes and currencies at 1939 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 1025.63 1.45 MSCI LatAm 2788.24 2 Brazil Bovespa 99222.15 1.64 Mexico IPC 43182.32 0.51 Chile IPSA 5,031.79 0.14 Argentina MerVal 40820.48 0.82 Colombia IGBC 12450.09 1.62 Currencies Latest Daily % change Brazil real 3.8598 1.04 Mexico peso 19.1380 0.20 Chile peso 696.2 0.57 Colombia peso 3253.1 0.86 Peru sol 3.332 0.45 Argentina peso 43.4000 1.38 (interbank) (Reporting by Susan Mathew in Bengaluru; editing by Jonathan Oatis)

European stocks at six-week high as ECB's Draghi hints at stimulus

18 Jun 2019

European Central Bank chief Mario Draghi's dovish remarks sent European stocks to six-week highs on Tuesday while news that the United States and China would resume trade talks at the G20 summit also boosted sentiment. | Video

EMERGING MARKETS-Latam FX firm on ECB's dovish boost, Brazil stocks jump 1%

18 Jun 2019

By Susan Mathew June 18 Latin American currencies firmed on Monday, with the Mexican peso hitting its highest in more than two weeks, boosted by the European Central Bank president's dovish comments. ECB President Mario Draghi said the bank will need to ease policy again, possibly through new rate cuts or asset purchases, if inflation doesn't head back to its target. "EM assets have bounced on the dovish ECB," said strategists at Morgan Stanley. "Perhaps markets believe that the ECB moves will reactivate the euro-funded carry trade, and that this would be enough for EM to keep strengthening versus the dollar, despite a weak euro-dollar pair," they said, cautioning however that any additional dollar strength could weigh on EM currencies. At 1353 GMT, the dollar was steady, bracing for the outcome on Wednesday of the U.S. Federal Reserve's meeting, when analysts increasingly expect the bank to signal that a rate cut may be in the offing. Brazil's real jumped 1%, extending last session's gains, while Mexico's peso climbed 0.5% to its highest since May 30 - with the ECB boost helping them rise amid shaky local political scenes. In Mexico, President Andres Manuel Lopez Obrador proposed holding a recall referendum on his presidency on March 21, 2021, if Congress cannot agree to a constitutional change permitting the vote during mid-term legislative elections. Meanwhile, in Brazil President Jair Bolsonaro on Monday appointed Gustavo Montezano as the head of development bank BNDES, replacing Joaquim Levy who resigned on Sunday after Bolsonaro publicly criticized him. Analysts at brokerage XP Investimentos said on Monday that whatever the merits of Levy's exit, it does not reflect well on the government or its efforts to paint Brazil as an attractive and politically stable destination for foreign capital. Sao Paulo-traded stocks rose 1% on broad-based gains, in line with other emerging market peers and world stocks. But, local listed shares of airline Azul SA lost 0.7%. Bolsonaro on Monday signed a bill into law allowing foreign airlines to operate domestic flights in Brazil, a move that could usher in new competition or lead foreign carriers to buy up the local players. Petrochemical company Braskem SA lost 0.8% controlling shareholder Odebrecht SA filed on Monday for bankruptcy protection. Key Latin American stock indexes and currencies at 1353 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 1024.73 1.36 MSCI LatAm 2793.19 2.18 Brazil Bovespa 99030.04 1.44 Mexico IPC 43112.64 0.34 Chile IPSA - - Argentina MerVal - - Colombia IGBC 12282.79 0.25 Currencies Latest Daily % change Brazil real 3.8540 1.19 Mexico peso 19.0470 0.68 Chile peso 696.1 0.59 Colombia peso 3263.8 0.53 Peru sol 3.3370 0.13 Argentina peso 43.9300 0.16 (interbank) (Reporting by Susan Mathew in Bengaluru Editing by Nick Zieminski)

EMERGING MARKETS-Latam FX dip as dollar comes off lows ahead of Fed outcome

17 Jun 2019

(Updates prices) By Susan Mathew June 17 Latin American currencies slipped on Monday, with Brazil's real giving up early gains, as the dollar came off session lows ahead of a Federal Reserve meeting later this week. The dollar steadied, hovering near the two-week highs hit earlier in the session, as investors reconsidered how dovish the Fed is likely to be after its two-day meeting set to end on Wednesday. "We don't see preemptive cuts, leaving the Fed in wait-and-see mode," wrote Mark McCormick, global head of FX strategy at TD Securities, in a note. "If the Fed can engineer a low-volume outcome this week that should reinforce the broad dollar," he said, which could hurt developing world currencies. Mexico's peso deepened its declines. Rating agency Moody's said unpredictable policymaking by the Mexican government and challenges facing debt-laden state oil firm Pemex are clouding economic and fiscal outlook for Mexico. Moody's had lowered its outlook on Mexico to negative earlier this month. Colombia's peso touched its lowest in more than one week, while a recovery in copper prices helped stem losses in Chile's peso. Copper is Chile's main export. Brazil's real gave up early gains to trade 0.16% lower ahead of the country's central bank rate decision on Wednesday. The benchmark interest rate is expected to be left unchanged, according to a Reuters poll, but it suggested that policy easing may be in the offing. On the pension reform front, Economy Minister Paulo Guedes said the bill could still be saved if lawmakers reverse some changes made to the draft last week. The changes and Guedes' criticism of it had hit markets on Friday. But lower house Speaker Rodrigo Maia said the changes will help ensure it gets majority backing in the final lower house vote and that he expects the special congressional committee to approve the bill on June 26. Stocks in Sao Paulo traded flat, in line with world stocks, as did most other regional bourses. State-run oil company Petroleo Brasileiro rose 0.6% despite a fall in oil prices. The firm said it made natural gas discoveries, which as per a report newspaper report, could help deliver the "cheap energy shock" to Brazil promised by Guedes. Planemaker Embraer SA rose on signing a contract worth $1.9 billion with United Airlines for the delivery of up to 39 E175 jets. Mining major Vale weighed the most. Iron ore prices fell after Vale said it expects to soon restore 20 million tonnes of yearly capacity at its Brucutu mine in Brazil. Markets in Argentina were closed for a local holiday. Key Latin American stock indexes and currencies at 1930 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 1011.48 -0.35 MSCI LatAm 2742.62 -0.41 Brazil Bovespa 98021.42 -0.02 Mexico IPC 43150.81 0.05 Colombia IGBC 12305.02 -0.09 Currencies Latest Daily % change Brazil real 3.9019 -0.08 Mexico peso 19.1745 -0.13 Chile peso 700.2 -0.06 Colombia peso 3281.03 -0.39 Peru sol 3.347 -0.03 (Reporting by Susan Mathew in Bengaluru; Editing by Richard Chang)

European stocks edge lower, Lufthansa drags after profit warning

17 Jun 2019

European stock markets closed marginally lower on Monday with a profit warning from Germany's Lufthansa hitting airline stocks, while markets globally awaited clues from the U.S. Federal Reserve on its policy direction.

EMERGING MARKETS-Most Latam currencies rise against softer dollar

17 Jun 2019

By Susan Mathew June 17 Latin American currencies largely rose against a softer dollar on Monday ahead of a U.S. Federal Reserve policy setting meeting this week which is expected to lay the groundwork for a rate cut later this year. Lower U.S. interest rate boost the relative attractiveness of developing world assets, usually spurring broad inflows into emerging markets. The Federal Reserve is expected to leave borrowing costs unchanged at the end of its two-day meeting on Wednesday but possibly signal a rate cut this year. "The meeting is all about providing the markets with sufficient reassurance that the next move will be a cut, most likely in July," wrote Piotr Matys, an emerging markets FX strategist at Rabobank. Investors in the region are also waiting for Brazil's central bank rate decision meeting on Wednesday. "We expect the Selic rate to stay unchanged at 6.50%, while a more dovish tone is likely to open doors for one cut later in 2019," said Vladimir Miklashevsky, a senior economist and trading desk strategist at Danske Bank. "Currently, there are fewer worries about accelerating inflation, which has climbed above the target, while staying within the boundaries." Brazil's real was up 0.12%. The currency slipped more than 1% on Friday after the country's economy minister expressed strong disappointment with what he called excessive changes to the government's pension reform bill. The minister, Paulo Guedes, had urged the government not to make too many changes to the bill which is seen as crucial in fixing the economy. Mexico's peso barely moved after posting a 2.4% rise last week when a deal to avert U.S. tariffs on Mexican goods helped the currency recover from lows hit on the tariff threats. The United States has doubled the number of asylum seekers it sends back each day to Mexico from El Paso, Texas, a Mexican immigration official said on Friday, in the first sign of action following a deal struck to avert U.S. tariffs last week. Among stocks, those listed in Sao Paulo were flat. Financial and material heavy-weights fell, while consumer stocks rose. Mining major Vale slipped 0.9%. The iron ore miner said it expects to soon restore 20 million tonnes of yearly capacity at its Brucutu mine in Brazil, which sent the steel-making ingredient's prices lower. IRB Brasil Resseguros SA recovered from last session's decline when it fell after sources said Brazil's government and BB Seguros Participações SA planned to sell their stakes in the reinsurer by July. Key Latin American stock indexes and currencies at 1344 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 1011.37 -0.37 MSCI LatAm 2747.43 -0.24 Brazil Bovespa 98019.70 -0.02 Mexico IPC - - Chile IPSA - - Colombia IGBC - - Currencies Latest Daily % change Brazil real 3.8887 0.26 Mexico peso 19.1580 -0.04 Chile peso 698.5 0.19 Colombia peso 3273.99 -0.18 Peru sol 3.346 0.00 (Reporting by Susan Mathew in Bengaluru; Editing by Susan Thomas)

EMERGING MARKETS-Stocks and currencies gain, led by Chinese markets

11 Jun 2019

June 11 Emerging markets gained on Tuesday as the Chinese government moved to support its stocks and currency, but new tariff threats in the U.S-China trade war kept risk appetite subdued.

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