*
Stocks climb 2.2%, FX up 0.92%
*
Brazil's annual inflation falls within central bank's
range
*
Ukraine peace talks, Fed rate cut expectations remain in
focusIMF reaches staff-level deal on $8.2 bln, four-year Ukraine
program
(Updates with afternoon trading)
By Twesha Dikshit, Niket Nishant and Nikhil Sharma
Nov 26 (Reuters) - Latin American assets extended their
rally on Wednesday, as investors remained confident that the
Federal Reserve would cut rates in December, while Brazil's
annual inflation fell within the central bank's target range for
the first time since January.
Emerging market assets have come under pressure in recent
days, with last week's selloff mirroring global risk-off
sentiment on concerns of overvalued technology stocks and
uncertainty over the Fed's monetary policy.
The MSCI index tracking regional stocks
climbed 2.1% and the broader index of regional currencies
added 0.92% - both on pace for their
third-straight sessions of gains.
Renewed efforts toward a Ukraine peace deal, the release of
delayed official U.S. data, and dovish commentary from Fed
officials have been the key catalysts behind the global market
rally this week.
In Latin America, Brazil's annual inflation was within the
central bank's target range in early November, according to
official data, fueling expectations of an interest rate easing
cycle.
The benchmark Bovespa Index advanced 1.7% to hit an
all-time high, while the real strengthened 0.82% against
the dollar - on pace for its best day since October 13.
"While the relative hawkishness of COPOM's (Brazilian
central bank) latest communications rule out a cut at the next
meeting in December, we think that falling inflation (and
expectations), the recent bout of weak activity data and the
strength of the real mean that the central bank is likely to
kick-off its easing cycle in January," said Capital Economics'
emerging market economist Kimberley Sperrfechter in a note.
With Brazil's policy rate at its highest level since the
mid-2000s, Capital Economics economists estimate the end-2026
Selic rate at 11.25% compared to the current 15%.
A separate data revealed the federal government recorded a
primary budget surplus of 36.5 billion reais ($6.83 billion) in
October, well below the surplus posted in the same month last
year.
A Reuters poll showed expectations that Latin America's largest
economy could see a winning streak for its stocks before facing
volatility ahead of next year's presidential vote.
President Luiz Inacio Lula da Silva leads all potential
right-wing challengers for the 2026 election, according to a
poll released on Tuesday.
"Some investment market participants see relatively modest
uncertainty on the political front. It is true that for some,
Mr. Lula is not the most market-friendly, but for now, the way
that he has handled the economy is actually good," said Andres
Abadia, chief LatAm economist at Pantheon Macroeconomics.
Meanwhile, the same poll showed estimations of Mexico's IPC
stock index rising 8.7% to 67,950 points at the end of
2026, on expectations of a renewal of the USMCA trade deal next
year.
Mexican stocks rose 0.12%, while the peso sky-rocketed 2%
- headed for its best day since April 9.
Colombia's equities added 0.4%, while the peso
strengthened 0.3% against the greenback.
Argentina's peso slipped 0.3% against the dollar, while
the S&P Merval Index jumped 3.5%, a day after economic
activity growth surpassed expectations for September.
Meanwhile, the International Monetary Fund reached a staff-level
agreement on a new four-year, $8.2 billion programme for Ukraine
as the country faces mounting wartime fiscal pressures.
Ukraine's international bonds were trading higher, having
rallied in recent weeks on progress towards a peace plan to end
the nearly four-year-old Russia-Ukraine war.
Elsewhere, South African assets jumped after muted U.S. economic
data further boosted hopes of a Fed rate cut. The rand
advanced 0.6% against the greenback, while stocks
gained 1.4%.
HIGHLIGHTS:
**
Brazil's finance minister does not expect government to
challenge bill on special pension
**
Argentina corn crops thrive now but face drought risk in key
growing period, LSEG says
**
Ghana central bank delivers third big rate cut as inflation
tumbles
Key Latin American stock indexes and currencies:
Stock indexes
Latest Daily % change
MSCI Emerging Markets 1372.07 1.35
MSCI LatAm 2709.26 2.2
Brazil Bovespa 158553.3 1.7
Mexico IPC 63288.09 0.12
Chile IPSA 9998.94 0.48
Argentina MerVal 2966925.47 3.53
Colombia COLCAP 2042.27 0.39
Currencies Latest Daily % change
Brazil real 5.3369 0.82
Mexico peso 18.3341 0.3
Chile peso 926.78 0.88
Colombia peso 3723.5 2
Peru sol 3.3663 0.08
Argentina peso (interbank) 1,452.0 -0.28
Argentina peso (parallel) 1,430.0 2.05
(Reporting by Twesha Dikshit and Niket Nishant in Bengaluru;
Editing by Sharon Singleton and Alistair Bell)
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