Stocks, FX drop as hawkish Fed bets rise; Latam FX outperform

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Emerging market stocks fell sharply

Friday, as strong US job growth stoked fears of hawkishness

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Federal Reserve rate hikes while Mexico and Chile

currencies rose after little-changed inflation data

the outlook for interest rates in Latin American countries.

The data showed that US employers hired more workers than expected

in September and the unemployment rate fell, fueling the bets of

a fourth consecutive 75 basis point increase in interest rates since the

Federal Reserve and strengthening of the dollar.

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MSCI’s emerging markets (EM) stock index fell 1.6%,

while the foreign exchange counterpart fell by 0.6%,

snapping a six-session winning streak.

“The USD has not found the right catalysts to peak

… and the terrain for EM FX remains fraught with problems

obstacles,” strategists at Societe Generale wrote in a note.

Most Asian currencies were in the red while elsewhere, the

The Polish zloty rose 0.7% against the euro

it recovered from a 1.5% drop on Thursday.

LATAM REMAINS RESILIENT

The Mexican Peso rose by 0.4% while the Chilean one

rose 0.7% against the dollar.

Mexico’s inflation remained at 8.7% over the 12 months

September, the data showed on Friday, stopping an upward trend that

had pushed consumer prices to 22-year highs. However, it was

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still well above the central bank’s target range.

“With the Fed still in a hawkish mood, (Mexico) tightening

The cycle has a little more to run,” senior Jason Tuvey said

emerging markets economist at Capital Economics.

Likewise, Chile’s inflation reached 0.9% in September,

slowing down compared to the previous month but taking the premises

The 12-month consumer price rate rises to 13.7%, still a long way off

above the central bank’s target range.

“We continue to wait for the BCCh (Central Bank of Chile)

increase by 50 bps, taking the policy rate to 11.25% next week

meeting,” said Barclays economists Pilar Tavella and Nestor

Rodríguez.

“We do not believe that the BCCh has room to cut

rates until the second half of 2023”.

Peru’s sun rose 0.2%. The country’s central bank

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raised its benchmark interest rate by 25 basis points, com

scheduled for Thursday

Brazil’s real was flat while Colombia’s peso was flat

reversed early gains and last fell 0.1%.

Elsewhere, Russia’s annual inflation slowed further

September, but consumer prices increased in month-on-month terms by

for the first time since May, the data was shown on Friday.

The growth of Mexico

is expected to slow down in the coming quarters, the

the International Monetary Fund said on Friday.

Key Latin American indices and currencies at 18:46 GMT:

Stock indices Last % of daily variation

MSCI Emerging Markets 896.49 -1.55

MSCI LatAm 2206.85 -1.33

Brazil Bovespa 116385.45 -1

Mexico CPI 45883.55 -0.96

Chile IPSA 5080.42 -1.99

Argentina MerVal 144645.33 -1.416

Colombia COLCAP 1207.80 -0.85

Currencies Latest daily exchange %

Brazilian real 5.2130 -0.07

Mexico weight 20.0270 0.39

Chile weight 936.9 0.67

Colombia weight 4614.13 -0.14

Peruvian sole 3.9534 0.24

Argentina weight 149.1700 -0.18

(interbank)

Argentina weight 273 3.30

(parallel)

(Reporting by Susan Mathew and Amruta Khandekar in Bangalore;

Edited by Paul Simao and Andrea Ricci)