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LatAm assets gain on hopes of US shutdown resolution, commodity strength
LatAm assets gain on hopes of US shutdown resolution, commodity strength
About this update from Banco Bradesco Sa
By Nikhil Sharma and Sukriti Gupta Latin American assets jumped on Tuesday as investors bet on an end to a prolonged U.S. government shutdown, while firmer commodity prices boosted the resource-heavy regional markets. MSCI's gauge for Latin American equities (.MILA00000PUS) jumped 2.3% to reach its highest since April 2022. "You're mostly seeing an environment of U.S. dollar depreciation today, which is probably a product of the federal government getting ready to reopen and also some U.S. data that's kind of consistent with the Federal Reserve cutting interest rates, at least in December," said Brendan McKenna, international economist at Wells Fargo. "(this is) placing depreciation on the U.S. dollar, but also supporting Latin America FX over the course of the day." The U.S. Senate on Monday approved a compromise to restore federal funding and extend it through January 30, potentially ending the longest government shutdown in U.S. history. Concerns about elevated technology valuations also resurfaced in the U.S., while a weekly update of ADP's preliminary payroll figures showed that private employers shed an average of 11,250 jobs a week for the four weeks ended October 25, highlighting fears of a deteriorating labor market. MSCI's index for Latin American currencies (.MILA00000CUS) hit an all-time high, up 0.7%, and was set to extend its daily winning run to five sessions, propped up by a weak U.S. dollar. In Brazil, the real FX_IDC:USDBRL rose 0.4%, supported by higher crude prices after new U.S. sanctions on Russian oil. Oil exports account for a sizable share of Brazil's export revenue. Brazilian inflation slowed more than expected to 4.68% in October, building a strong argument for policy easing next year. The current inflation rate is slightly above the central bank's 3% target. The bank had kept the benchmark Selic rate steady last week near a 20-year high and signaled further pauses to guide inflation back to target. Sao Paulo's main stock index BMFBOVESPA:IBOV hit a record high, up 1.5%, and was poised to extend its winning streak to 15 sessions, a run last seen in May 1994. Heavyweight oil firm Petrobras BMFBOVESPA:PETR3 supported the index by rising 2.5%. The index is up more than 31% in 2025, on pace for its best year since 2019, highlighting investors' appetite for developing markets that offer cheaper valuations and higher yields. Colombia's benchmark index BVC:ICAP has gained more than 50% in 2025, eyeing its best year since 2009 after periods of underperformance. For the day, the index was up 0.4%. Fresh data highlighted growing price pressures after annual inflation in the South American economy rose more than expected to 5.51%, well above the central bank's 3% target. The local peso FX_IDC:USDCOP added 0.5%. In Mexico, the local equity index BMV:ME advanced 1.9% and the peso currency FX_IDC:USDMXN extended gains for the third straight session, up 0.4%, helped by energy prices. But the latest data underscored growth concerns as factory activity in Latin America's second-largest economy fell more than expected in September from a year earlier, marking a sixth straight month of contraction. The peso of the world's biggest copper producer Chile FX_IDC:USDCLP rose 0.4%, tracking a jump in red metal prices. The Santiago stock index BCS:SP_IPSA advanced 0.5%. The country is braced for a presidential election later this weekend. Stocks in Argentina BCBA:IMV jumped 1.1%, while the local peso FX_IDC:USDARS gained 1.1%. Argentina's annual inflation rate is set to hit a six-year low, according to a Reuters poll ahead of official data due on Wednesday. Key Latin American stock indexes and currencies: Equities Latest Daily % change MSCI Emerging Markets CBOE:EFS 1403.85 0.26 MSCI LatAm (.MILA00000PUS) 2720.94 2.29 Brazil Bovespa BMFBOVESPA:IBOV 157536.1 1.47 Mexico IPC BMV:ME 64285.44 1.89 Chile IPSA BCS:SP_IPSA 9710.83 0.52 Argentina Merval BCBA:IMV 2984321.28 1.09 Colombia COLCAP BVC:ICAP 2080.49 0.41 Currencies Latest Daily % change Brazil real FX_IDC:USDBRL 5.2709 0.37 Mexico peso FX_IDC:USDMXN 18.3115 0.35 Chile peso FX_IDC:USDCLP 933.35 0.43 Colombia peso FX_IDC:USDCOP 3733.36 0.46 Peru sol FX_IDC:USDPEN 3.365 0.04 Argentina peso (interbank) FX_IDC:USDARS 1405 1.1 Argentina peso (parallel) (ARSB=) 1420 -8.80