Brazilian real, stocks lead gains among Latin American peers

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Brazil’s resource-heavy main stock

index jumped on Tuesday, supported by gains in commodity-linked

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stocks, while a subdued dollar boosted Latin American

currencies.

The MSCI’s index for Latin American stocks

added 2.6%, with Brazil’s Bovespa stock index leading

gains among regional peers, helped by a jump in materials and

energy stocks tracking strong commodity prices.

Metal and oil prices rallied on hopes that protests against

COVID-19 curbs in China would lead to a faster easing of the

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policies that have stifled economic growth and sparked concerns

about demand in top consumer China.

The Bovespa has risen 5.9% so far this year, outperforming

the 24.5% fall in the broader emerging market.

Brazil stocks will rally by double-digits through end-2023,

despite uncertainty about new government policies as

President-elect Luiz Inacio Lula da Silva seeks to balance

social priorities and budget constraints, a Reuters poll

predicted.

“The case for Brazil outperformance is still intact, but

that near-term volatility should be expected,” wrote Lawrence

Brainard, chief emerging markets economist at TS Lombard in a

note, adding that markets have misread Lula’s policy priorities

and strategy.

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“While the extent to which Lula will be successful in

pushing through major economic reform is not yet clear, there is

widespread support from business and the broader public for

addressing the festering fiscal mess.”

Data showed Brazil’s formal net jobs creation in October

came in well below expectations, in the second weakest month of

the year.

The Latin American currencies index gained

1.2% on Tuesday and has risen 13.7% so far this year,

outperforming the broader emerging market.

Brazil’s real added 1.3% against a muted

dollar, leading gains among Latin American currencies.

Mexico’s peso added 0.8% against the dollar, with

stronger crude prices boosting the oil producer’s currency.

Colombia’s peso gained 0.5%.

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The United States on Monday threatened legal action against

Mexico’s plan to ban imports of genetically modified corn in

2024, saying it would cause huge economic losses and

significantly affect bilateral trade.

Currencies of the world’s biggest copper producers, Chile

and Peru, gained 0.7% and 0.6%, respectively.

Chile’s unemployment rate hit 8.0% in the August-October

period, government statistics agency INE said, stable from the

quarter through September.

Elsewhere in emerging markets, data showed South Africa’s

official unemployment rate fell slightly to 32.9% in the third

quarter of 2022 from 33.9% in the second quarter, but stubbornly

high youth unemployment remains a worry.

Adding to concerns, South Africa’s unreliable power supply

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and its high level of government debt are two of the main risks

to its financial stability, said the country’s central bank.

Key Latin American stock indexes and currencies at 1455 GMT:

Stock indexes Latest Daily % change

MSCI Emerging Markets 953.16 2.41

MSCI LatAm 2198.28 2.56

Brazil Bovespa 111092.52 2.12

Mexico IPC 51118.53 0.07

Chile IPSA 5210.93 0.06

Argentina MerVal 165079.42 0.488

Colombia COLCAP 1246.14 0.41

Currencies Latest Daily % change

Brazil real 5.2948 1.30

Mexico peso 19.1610 0.70

Chile peso 906.9 0.62

Colombia peso 4806.82 0.50

Peru sol 3.8281 0.11

Argentina peso (interbank) 166.9500 -0.20

Argentina peso (parallel) 313 1.60

(Reporting by Bansari Mayur Kamdar in Bengaluru; editing by

Jonathan Oatis)