By Avinash P, Ragini Mathur and Purvi Agarwal
Most Latin American stocks rebounded on Thursday as global risk appetite improved and currencies firmed against a subdued U.S. dollar, while investors assessed the Mexican central bank's decision to hold interest rates steady.
The stocks were also buoyed by rising commodity prices.
On Thursday, U.S. data showed inflation topped 4% for the first time in three years, reinforcing expectations that the Federal Reserve could raise interest rates at least once this year.
Still, optimism around AI chip stocks and a decline in oil prices supported global equities earlier in the session. However, global assets pared some of their gains as the rally lost steam and oil prices reversed their declines.
MSCI's regional stocks index (.MILA00000PUS) rose 1.6%, while its currency index (.MILA00000CUS) gained 0.6%, after both gauges touched two-week lows in the previous session.
Meanwhile, thousands were feared dead in Venezuela after two powerful earthquakes struck Caracas and surrounding areas, further straining the country's debt restructuring efforts.
"The earthquakes likely increase the already high debt restructuring risk and high political risk for acting President Delcy Rodriguez," said Hasnain Malik, head of geopolitical risk and EM equity strategy research at Tellimer.
"However, U.S. alignment likely provides a partial offset for the pressure on the fiscal account and recent precedents from other natural disasters in emerging markets suggest that the impact on financial markets is limited and temporary."
In Mexico, the central bank held rates steady at 6.50%, beginning an anticipated pause after a final rate cut in May that concluded a more-than-two-year easing cycle.
Local stocks BMV:ME gained 1.6%, boosted by a 2.8% rise in miner Grupo Mexico BMV:GMEXICO/B while the peso FX_IDC:USDMXN was up 0.6%. Both the stock index and the currency were set for their biggest one-day jump in two weeks.
"The balance of risks will tilt towards renewed tightening towards the end of the year, reflecting persistent inflation pressures and the prospect of Fed rate hikes," said Liam Peach, senior EM economist at Capital Economics.
Brazil's central bank pushed back against market perceptions that it had extended its monetary policy horizon, after its latest rate decision steepened the yield curve. It also published updated inflation forecasts showing price increases near target by the end of 2028.
Brazil's Bovespa index BMFBOVESPA:IBOV advanced 1% and the real FX_IDC:USDBRL was up 0.3%.
Colombia faces a funding shortfall of 39.6 trillion pesos ($11.55 billion) to meet its 2026 fiscal target, up from a previous estimate of 32.1 trillion pesos, the Autonomous Committee of the Fiscal Rule said.
Markets are watching how President-elect Abelardo De La Espriella's administration will tackle deteriorating public finances. His market-friendly rhetoric has helped local assets rally, making Colombia the region's best-performing market year-to-date.
Bogota equities BVC:ICAP were flat, while the peso FX_IDC:USDCOP appreciated 0.3%.
Peru's right-wing presidential candidate Keiko Fujimori maintained an unassailable lead, though the electoral authority has yet to officially declare a winner. Lima's stocks benchmark (.MXNUAMPESCPGPE) added 1%, while the sol FX_IDC:USDPEN was little changed.
Elsewhere, Gabon's international bonds fell after Moody's cut its outlook on the country's credit rating to "negative" from "stable" citing fiscal imbalances.
Bonds due in 2031 fell as much as 1 cent on the dollar, Tradeweb data showed. Those due in 2029 fell 0.8 cent.
Key Latin American stock indexes and currencies:
Latin American market prices from Reuters
Equities
Latest
Daily % change
MSCI Emerging Markets CBOE:EFS
1756.51
1.52
MSCI LatAm (.MILA00000PUS)
2942.27
1.61
Brazil Bovespa BMFBOVESPA:IBOV
172137.35
0.96
Mexico IPC BMV:ME
67356.92
1.63
Chile IPSA BCS:SP_IPSA
10748.84
0.69
Argentina Merval BCBA:IMV
3086555.21
-0.77
Colombia COLCAP BVC:ICAP
2270.68
-0.01
Currencies
Latest
Daily % change
Brazil real FX_IDC:USDBRL
5.1798
0.3
Mexico peso FX_IDC:USDMXN
17.4893
0.6
Chile peso FX_IDC:USDCLP
920.37
-0.19
Colombia peso FX_IDC:USDCOP
3430.57
0.29
Peru sol FX_IDC:USDPEN
3.4194
-0.03
Argentina peso (interbank) FX_IDC:USDARS
1477
0.14
Argentina peso (parallel) (ARSB=)
1510
0