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Friday, April 4, 2014

EMERGING MARKETS-Latam currencies weaken on U.S. data, stocks gain

By Asher Levine SAO PAULO, April 2 (Reuters) - Latin American currencies weakened against the dollar on Wednesday after encouraging U.S. employment data raised expectations that monetary stimulus in the world's largest economy would continue to be wound down at its current pace.

Most of the region's stock indexes rose, with the MSCI Latin American share index touching its highest level of the year.

Shares of state-run oil firm Petroleo Brasileiro SA helped push Brazil's Bovespa up over 2 percent. Data released by ADP on Wednesday showed U.S. companies stepped up hiring in March while the previous months' gains were revised higher.

"The ADP numbers, especially the revision of January and February, increases the likelihood of lower unemployment," said Pedro Tuesta, an economist with research firm 4Cast, referring to the U.S. government's key monthly employment report due Friday.

Investors are watching the data closely as it is expected to influence the U.S. Federal Reserve's stance on its bond-buying stimulus program, which has boosted Latin American currencies and lent support to emerging market stocks.

"The whole emerging market class asset is falling to accommodate a stronger dollar," Tuesta said, adding that part of Wednesday's move was due to profit-taking after a recent rally.

Brazil's real weakened about 0.35 percent on Wednesday, though is up nearly 4 percent against the dollar so far this year. The Chilean, Colombian and Mexican pesos all weakened less than 0.5 percent against the dollar.

Latin American currencies are expected to weaken over the next 12 months despite recent signs of market appetite for higher-yielding assets, a Reuters poll showed on Wednesday.

Yields on Brazilian interest rate futures were mostly stable ahead of the central bank's interest rate decision, due after the market close on Wednesday.

The bank is widely expected to raise its benchmark Selic interest rate by 25 basis points to 11 percent. Brazil's Bovespa was on track to close at its highest level this year, with Petrobras preferred shares up over 4 percent as investors extended a recent rally.

Petrobras shares jumped in recent sessions on investor optimism that President Dilma Rousseff was losing support ahead of October's presidential election.

"The market has recovered over all these past days, but is still far from being in line with markets abroad," said Pedro Arantes, a broker with BGC Liquidez in Sao Paulo.

Arantes said part of Petrobras' gains on Wednesday were likely due to increased speculation that the Rousseff administration would lose more support in future polls.

Investors have been critical of her administration's treatment of Petrobras, due to a policy that requires the company to import fuel at a loss in order to tamp down inflation.

Elsewhere in Latin America, Mexico's IPC stock index rose for the fifth straight session, driven by shares of blue-chip cement producer Cemex, while Chile's IPSA index was little changed a day after a massive earthquake off its northern coast.

The 8.2 magnitude quake that shook northern Chile late on Tuesday killed at least six people and triggered a tsunami that pounded the coastline with two-meter (7-foot) waves.

yahoo.com

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