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EMERGING MARKETS-Pension reform hopes lift Brazil assets, dovish Fed powers Latam FX

Agamoni Ghosh

Latam FX@ (Updates prices, adds quote) July 10 (Reuters) - Expectations of passage of a landmark pension reform bill in Brazil's lower house pushed Sao Paulo stocks to historic highs on Wednesday, while Latin American currencies benefited from a softer dollar after Fed chair Jerome Powell's dovish comments. MSCI's index of Latin American stocks rose 1.5%, outperforming the broader emerging market index as heavyweight Brazil index hit a fresh record high. The Bovespa rose more than 1% helped by optimism over the pension reform bill, with the lower house of Congress set to begin voting later in the day after a delay due to political bargaining between the government and opposition lawmakers. Pension reform is the cornerstone of President Jair Bolsonaro's economic agenda as he tries to bring the country's public finances back to health, aiming to save the public purse around 1 trillion reais ($263 billion) over the next decade. The real also rose over 1% while getting an additional boost from Powell's comments, which bolstered expectations for an interest rate cut from the U.S. Federal Reserve this month. Powell said the Fed was ready to "act as appropriate" to sustain a decade-long U.S. economic expansion and pointed to economic risks including persistently weak inflation, slowing global growth and a downturn in business investment. Other regional currencies also rose with Chile's and Colombia's pesos climbing between 0.4% and 0.6%. Argentina's peso made nominal moves. Mexican assets underperformed, with the peso falling 0.1%, adding to a loss of more than 1% on Tuesday after the abrupt resignation of the country's finance minister Carlos Urzua, who cited "extremism" in economic policy and conflicts of interest with other members of the government as reasons for leaving. Mexican President Andres Manuel Lopez Obrador said Urzua had differences with the president's chief of staff and businessman Alfonso Romo. He appointed deputy finance minister Arturo Herrera to replace him. "The reasons Urzua gave for his departure, such as questionable policy decisions within the administration, will raise questions over Mexico's fiscal credibility especially at a time when investors are examining the prospects for state support of Pemex," Chris Turner, head of EMEA and LATAM research at ING, said in a note.

Key Latin American stock indexes and currencies at 1925 GMT

Stock indexes daily %Latest changeMSCI Emerging Markets 1051.16 0.83MSCI LatAm 2965.52 1.51Brazil Bovespa 105781.61 1.2Mexico IPC 42833.83 0.04Chile IPSA 5059.52 0.11Argentina MerVal 42747.71 2.38Colombia IGBC 13012.36 0.82Currencies daily %

change Latest

Brazil real 3.7515 1.49Mexico peso 19.1530 -0.13Chile peso 684.95 0.62Colombia peso 3201.55 0.38Peru sol 3.283 0.40Argentina peso 41.8200 0.07

(interbank)

(Reporting by Agamoni Ghosh in Bengaluru Editing by Sonya Hepinstall)