EMERGING MARKETS-Latam assets extend November rally, on track for weekly gains

BY Reuters | ECONOMIC | 12/01/23 03:54 PM EST

      Chile's economic activity index up 0.3% in October

      Mexico ETF posts strongest monthly inflows since 2016

      Brazil set to maintain current rate cut pace - central

      Latam stocks up 1.3%, FX up 1%

 (Updated at 3pm ET/2000 GMT)
    By Johann M  Cherian
       Dec 1 (Reuters) - Most Latin American stocks and
currencies jumped on Friday, kickstarting December on strong
footing as investors ramped up bets that a likely dovish policy
tilt from the Federal Reserve would boost risk assets.
        Traders added to bets on a March 2024 start to Fed rate
cuts after Chair Jerome Powell said in closely watched remarks
that rate hikes were achieving what was hoped, though he vowed
to move "carefully."
    MSCI's index tracking Latin American equities
 gained 1.3% in afternoon trading, after notching
its best month since 2020 in November on hopes that U.S.
interest rates have peaked.
    A basket of regional currencies strengthened
1% as the dollar and U.S. Treasury yields fell.
    Both indexes were set for weekly gains, with the stocks
index up 1% and currencies edging up 0.4%.
    More broadly, Bank of America analysts said that emerging
market fixed income assets saw outflows of $59 million, in its
18th straight week, while stocks saw outflows of $1.2 billion,
its eighth straight week of losses.
    Meanwhile, the real reversed earlier losses and
gained 0.9% after Brazilian central bank director Diogo Guillen
said current pace of 50-basis-point rate cuts per meeting will
remain in place for the next few meetings.
    Separately, data showed industrial production rose by a
less-than-expected 0.1% in October, pointing to a sluggish start
to the fourth quarter.
    "Today's numbers serve as a reminder that risks are still
biased to the downside and that the COPOM (central bank) will
have to accelerate the pace of monetary easing, assuming fiscal
and external conditions remain benign," said Andres Abadia,
chief Latin America economist at Pantheon Macroeconomics.
    Brazil's Bovespa reversed earlier losses, rising
    Shares of state-owned oil firm Petrobras slipped
0.5% after the company's chief executive said Brazil is expected
to join the OPEC+ group of oil-producing countries in January
but would not take part in the group's coordinated output caps.
    Mexico's benchmark index shed 0.4% after the
country's president said the minimum wage will rise 20% next
year, which analysts said would add to inflationary pressures.
    Still, a sharp rally in Mexican shares and optimism around
companies moving to the Latin American country to be closer to
the U.S. have spurred buying into exchange-traded funds (ETF)
focused on local stocks, with iShares MSCI Mexico ETF posting
its strongest month of inflows in seven years.
    Chile's peso strengthened nearly 2% after the IMACEC
economic activity index rose 0.3% in October.
    Argentina's Merval index gained 6.8%, but was on
track for weekly losses of 5.4% after jumping over 42% the week

    Latin American stock indexes and currencies at 2000 GMT:

                              Latest    Daily %
 MSCI Emerging Markets          984.76     -0.24

 MSCI LatAm                    2504.57      1.34

 Brazil Bovespa              127928.84      0.47

 Mexico IPC                   53823.49     -0.44

 Chile IPSA                    5886.71      1.17

 Argentina MerVal            868882.02     6.822

 Colombia COLCAP               1149.46      0.23

       Currencies             Latest    Daily %
 Brazil real                    4.8776      0.02

 Mexico peso                   17.1967      1.06

 Chile peso                      854.9      1.93

 Colombia peso                 3963.99      1.10
 Peru sol                       3.7213      0.12

 Argentina peso               361.0500     -0.15

 Argentina peso                    935     -3.21

 (Reporting by Johann M Cherian and Lisa Mattackal in Bengaluru;
editing by Jonathan Oatis and Grant McCool)

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.