By Ragini Mathur and Johann M Cherian
Most stocks and currencies in resources-rich Latin America were higher on Monday, tracking gains in commodity prices, while investors sold the dollar after the Trump administration's threat to indict U.S. Federal Reserve Chair Jerome Powell resurfaced worries about the Fed's independence.
The Trump administration subpoenaed Powell over comments he made to Congress about a building renovation project, prompting the Fed chief to call the move a "pretext" to gain more influence over the setting of interest rates.
MSCI's Latin American currencies gauge (.MILA00000CUS) was pinned at record highs, with pesos of Chile FX_IDC:USDCLP and Mexico FX_IDC:USDMXN among top gainers as the dollar fell. The equities index (.MILA00000PUS) was up 0.4%, to its highest level since early 2020.
"Whether the White House's latest attempt to influence Fed policy succeeds or not is key to the medium- and long-term market implications. But if it does succeed, we foresee a weaker USD," said Thierry Wizman, global FX & rates strategist at Macquarie Group.
Both MSCI indexes closed last week with significant gains, despite heightened volatility after the U.S. military captured Venezuelan leader Nicolas Maduro. Many investors viewed this development positively, expecting U.S. actions to facilitate market-friendly reforms across the Latin American region.
The country's stocks (.IBC) and defaulted international debt have rallied in the aftermath of the intervention and Trump and his team have told the oil companies they need to invest and rebuild Venezuela's sector first, and that any debt repayment would come later.
On Monday, Mexican stocks BMV:ME were a standout, up 1% at a record high, as mining companies Industrias Penoles BMV:PE_OLES and Grupo Mexico BMV:GMEXICO/B rallied, tracking higher prices of precious and base metals.
Stocks in copper exporter Chile BCS:SP_IPSA and Peru (.MXNUAMPESCPGPE) advanced 1.2% and 2.5%, respectively. Markets in Colombia were closed on account of a public holiday.
Geopolitical developments continued to dominate elsewhere in emerging markets as investors monitored a violent crackdown on ongoing protests in oil-rich Iran.
Meanwhile, data from a banking trade group showed emerging market portfolio flows rebounded sharply in December, making the overall yearly net inflow the largest since 2021.
Key Latin American stock indexes and currencies at 20:05 GMT:
Latin American market prices from Reuters
Equities
Latest
Daily % change
MSCI Emerging Markets CBOE:EFS
1467.04
1.01
MSCI LatAm (.MILA00000PUS)
2832.21
0.44
Brazil Bovespa BMFBOVESPA:IBOV
163275.34
-0.06
Mexico IPC BMV:ME
66787.17
1.1
Chile IPSA BCS:SP_IPSA
11066.16
1.25
Argentina Merval BCBA:IMV
3077458.94
-0.388
Currencies
Latest
Daily % change
Brazil real FX_IDC:USDBRL
5.3707
0.01
Mexico peso FX_IDC:USDMXN
17.9119
0.26
Chile peso FX_IDC:USDCLP
883.9
1.01
Colombia peso FX_IDC:USDCOP
3711
0.04
Peru sol FX_IDC:USDPEN
3.36
0.01
Argentina peso (interbank) FX_IDC:USDARS
1467
-0.14
Argentina peso (parallel) (ARSB=)
1485
1.35