Emerging Markets: Latam markets falter as US tariff concerns linger ahead of deadline

Controladora Vuela Compania de Aviacion SAB de CV

24/02/2025 20:22

* 
      Mexico inflation up 3.74% y/y in first half of February 
    

        * 
      Azul jumps after earnings 
    

        * 
      Bank of Israel keeps rates on hold 
    

        * 
      MSCI Latam FX index down 0.6%, stocks down 1.1% 
    

  
 (Updates to mid-session trading)
    By Lisa Pauline Mattackal and Purvi Agarwal
       Feb 24 (Reuters) - 
    An index tracking Latin American currencies was on track for
its worst day in three weeks on Monday and stocks were lower as
investors assessed the likelihood and severity of potential U.S.
tariffs ahead of a key deadline next week. 
    MSCI's index tracking Latin American currencies against the
dollar  .MILA00000CUS  dipped 0.6%, eyeing its worst session
since early February. The stocks index  .MILA00000PUS  dropped
1.1%. 
    The Latam FX index has gained around 3% so far in February,
while the gauge of regional stocks has gained about 2.4% as
ebbing concerns about U.S. President Donald Trump's threatened
tariffs have caused the dollar's rally to lose some steam. 
    Most investors increasingly look at Trump's tariffs as a
mostly negotiating tactic, but still, uncertainty around their
materialization has kept investors nervous. 
        Mexico and Canada are expected to 
    intensify efforts
     on border security and curbing fentanyl trafficking this
week to avoid punishing 25% tariffs on their exports to the
U.S., the deadline for which stands at March 4.
  
    "Our working assumption is that Trump won't go ahead with
25% tariffs on his neighbors. However, a series of hawkish
comments followed by a last-minute deal would be a familiar
script, and we see downside risks for CAD and MXN before any
reassurance on tariffs arrives," said analysts at ING. 
        On the other hand, Thierry Wizman, Global FX & Rates
Strategist at Macquarie said, "with the contours of a broader
US-Mexico agreement coming into place perhaps earlier than
expected, and with formal negotiations over the tariff issue
too, we're getting more constructive on the MXN." 
  
        The Mexican peso  MXN=  and stocks  .MXX  were flat.
Data showed Mexico's headline inflation hit 3.74% in the first
half of February, in line with forecasts and still within the
central bank's 2% to 4% target range, supporting expectations
for another rate cut. 
    Most currencies in the region fell, led by a 0.5% drop in
Colombia's peso  COP= . The Brazilian real  BRL=  was down 0.3%.
        Among stocks, Argentina's Merval index  .MERV  reversed
early gains and was last down 0.7%. 
        Brazil's Bovespa  .BVSP  fell 1.2%, despite a 4.7% gain
in Brazil-listed shares of Azul  AZUL4.SA  after the airline
posted fourth-quarter core earnings slightly above market
expectations, while Mexico's Volaris  VOLARA.MX  dropped 11.2%
after its earnings report. 
        Colombia's COLCAP  .COLCAP  gained 1%, outperforming
peers.  
  
    Elsewhere, the Bank of Israel kept short-term interest rates
unchanged at 4.50%, as expected. The shekel  ILS=  edged down
0.2%, while stocks  .TA125   .TA35  reversed early gains. 
    Citigroup upgraded both Indian and Chilean equities to
'overweight' from 'neutral.' The brokerage remains neutral on EM
equities in their global allocations, citing risks of volatility
on tariff news. 
    Meanwhile, Peru's economy minister said the country is
expected to be Latin America's second-fastest growing economy
this year, projected to grow at 4%. 
    The rouble  RUB=  rose 0.9% against the dollar as investors
continued to monitor discussions on the Russia-Ukraine war. 

    HIGHLIGHTS 
    ** Ethiopia central bank holds $60 million foreign exchange
auction
    ** Rumble and Trump Media file motion in US court over
decision by Brazilian judge
    ** Hungary's Orban flags new legislation, crackdown on media
over 'foreign funding'
    ** China's Shimao secures creditor backing for $11 bln
offshore debt revamp 
    
    Key Latin American stock indexes and currencies at 1950 GMT:
    
    
                                        
                                        
                                        
                                        
                                        
                                        
                                        
 MSCI Emerging Markets         1135.85         -1
  .MSCIEF                               
 MSCI LatAm  .MILA00000PUS     2051.53      -1.08
 Brazil Bovespa  .BVSP        125563.7      -1.23
 Mexico IPC  .MXX             53750.75       0.02
 Chile IPSA  .SPIPSA           7311.33      -0.01
 Argentina Merval  .MERV     2349129.5      -0.65
                                     1  
 Colombia COLCAP  .COLCAP       1646.6       0.98
                                                 
                                        
                                        
                                        
                                        
                                        
                                        
                                        
 Brazil real  BRL=              5.7491       -0.3
 Mexico peso  MXN=             20.4182      -0.04
 Chile peso  CLP=               943.36      -0.11
 Colombia peso  COP=            4112.5      -0.46
 Peru sol  PEN=                  3.683       0.05
 Argentina peso (interbank)       1060      -0.14
  ARS=RASL                              
 Argentina peso (parallel)        1220       0.82
  ARSB=                                 
 
  

 (Reporting by Lisa Mattackal and Purvi Agarwal in Bengaluru;
Editing by Alistair Bell and Andrea Ricci)
 ((LisaPauline.Mattackal@thomsonreuters.com;))