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Stocks down 0.6%, currencies fall 0.4%
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Brazil's 12-month inflation slows in November
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Chile heads for presidential run-off on Sunday
By Niket Nishant
Dec 10 (Reuters) - Latin American assets resumed their decline on Wednesday, following a one-day reprieve as investors braced for potentially hawkish commentary from Federal Reserve Chair Jerome Powell.
The MSCI index of Latin American stocks slid 0.6%, while the currencies gauge fell 0.4%.
The price action indicates that although a 25-basis point cut is already priced in, investors may be expecting Powell to dampen prospects for further easing, reducing the appeal of emerging market assets.
Emerging market assets typically benefit when the Fed lowers rates, as cheaper U.S. funding reduces financing costs for companies in the region and encourages investors to seek better returns in higher-yielding currencies.
INVESTORS JUGGLE POLITICAL FACTORS, INFLATION DATA
Investors are also focused on a series of political and economic developments. Data on Wednesday showed Brazil's 12-month inflation slowed in November to its lowest level in more than a year, ahead of the central bank's final policy decision of 2025, where it is widely expected to keep rates on hold.
The Bovespa index edged 0.3% higher, steadying a day after being rattled by the presidential bid of Senator Flavio Bolsonaro, the eldest son of former President Jair Bolsonaro.
The real fell 0.5% against the dollar, marking a second consecutive day of losses.
In Argentina, stocks gained 0.2% while the peso rose 0.1%. The newly elected Congress will begin a period of special legislative sessions in which President Javier Milei intends to push a series of reforms he has said are necessary to boost the country's economy.
The country is also looking to issue bonds worth around $1 billion, targeting a coupon rate below 9%. Most of its dollar-denominated bonds were trading slightly higher.
Colombian stocks slid 0.3% and the local peso was little changed. A magnitude 5.8 earthquake struck the northern part of the country.
Separately, Reuters reported that the country's guerrilla group, the National Liberation Army, is willing to resume peace negotiations with the current government, or with whichever new government is elected next year if commitments previously agreed upon at stymied peace talks are honored.
Chilean equities were up 0.4%. Far-right candidate Jose Antonio Kast is widely expected to win Chile's presidential run-off on Sunday and become the country's most conservative leader since its military dictatorship. The peso rose 0.3% against the greenback.
"A Kast victory would reinforce the recent surge of right and far-right political actors in Latin America," wrote Ken Roberts, a professor of government with a specialization in Latin American politics at Cornell University.
"But it would also continue a much longer pattern of volatile anti-incumbent voting in Latin America's turbulent democratic waters."
Separately, Mexico's lower house approved tariffs of up to 50% from next year on imports from China and several other Asian countries. Its assets were largely steady.
Key Latin American stock indexes and currencies:
Equities
Latest Daily %
change
MSCI Emerging Markets 1382.4 0.25
MSCI LatAm 2678.11 -0.58
Brazil Bovespa 158484.96 0.32
Mexico IPC 63724.92 0.05
Chile IPSA 10222.72 0.42
Argentina Merval 2992758.03 0.191
Colombia COLCAP 2116.27 -0.34
Currencies
Latest Daily %
change
Brazil real 5.4585 -0.47
Mexico peso 18.196 -0.09
Chile peso 923.18 0.26
Colombia peso 3853.27 0.04
Peru sol 3.3662 -0.13
Argentina peso (interbank) 1441 0.14
Argentina peso (parallel) 1430 1.05
(Reporting by Niket Nishant in Bengaluru; Editing by Sharon Singleton)
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