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Emerging Markets-latam Assets Maintain Gains as Fed Holds Rates; Brazil’s Real Jumps Ahead of Copom Verdict

Nov 1 (Reuters) – Most Latin American currencies and stocks jumped on Wednesday as the U.S. Federal Reserve kept interest rates unchanged, while Brazil’s currency and stocks ahead of a Brazilian central bank rate decision later in the day,

MSCI’s index tracking Latam stocks .MILA00000PUS rose 2.8%, its best session since Oct. 10, while a basket of regional currencies .MILA00000CUS jumped 1.3% against the dollar to a five week high.

The Fed held interest rates steady as expected, and traders added to bets the central bank is done hiking, although policymakers left the door open to a further increase in borrowing costs.

After declines in October, analysts see upside for emerging market currencies that offer investors higher returns versus the U.S. dollar, amid hopes of the U.S. tightening cycle nearing an end.

However, Holzer sees a “limited amount of positive momentum,” for emerging markets assets given uncertainty over growth, and Chairman Jerome Powell’s comments that interest rate cuts are not yet on the table.

Meanwhile, Brazil’s real BRL= climbed 1.3% ahead of a central bank monetary policy decision, where economists widely expect the regulator to slash the Selic interest rate by 50 basis points to 12.25%. The decision is due at 2100 GMT.

“At 12.75% (currently), the policy rate is on a highly contractionary stance, excessively so now that inflation expectations are at 4%,” Felipe Camargo, senior emerging markets economist at Oxford Economics.

Also aiding sentiment during the session, Brazil’s domestic industrial production in September saw its second positive month in a row but it continued to grow at low levels amid high interest rates pressure.

Meanwhile, Mexico’s peso MXN= jumped 1.3% after a central bank poll showed analysts have slightly raised expectations for 2023 and 2024 economic growth. O/R

Among individual equity indexes, Brazil’s Bovespa .BVSP advanced 2%, with Telefonica’s Brazilian unit VIVT3.SA surging 5% after the firm reported upbeat net profit for the third quarter.

Argentina’s Merval .MERV index jumped nearly 7% after economy minister and presidential candidate Sergio Massa pushed back planned fuel tax hikes.

Mexico’s benchmark index .MXX climbed 1.5% with Banorte GFNORTEO.MX up 4% after the financial group posted a 15% increase in third-quarter net profit.

Elsewhere, Nigeria’s All Share Index.NGSEINDEX built on recent gains to cross the psychological threshold of 70,000 points for the first time.

Chilean and Peruvian assets saw thin trading with local markets closed for a public holiday.

Source: Nasdag