EMERGING MARKETS-Brazil markets hit by oil auction results, broader Latam firm

Sruthi Shankar

firm@ Nov 6 (Reuters) - Most Latin American currencies were propped up by a soft dollar on Wednesday as investors awaited developments in U.S.-China trade negotiations, although Brazil markets were knocked lower by results from a closely watched auction of oil exploration blocs. After opening stronger against the dollar, the real gave more than 1.2% after the state-owned oil firm Petrobras became the sole bidder for the block Itapu.

The company's shares dropped 2.5% after gaining about 3% earlier in the session. A Petrobras consortium, including China's state-run companies CNOOC and CNODC won the massive Buzios oil block, again without any rival bids. The lack of competition underscored the costly terms of the blockbuster oil round, which had discouraged several major oil firms. Flavio Serrano, a senior economist at Haitong Bank said investors had expected more participation from foreign firms and were disappointed with the auction results, with Petrobras taking 90% of the Buzios consortium. Executives from many of the world's biggest oil companies gathered in Rio de Janeiro to compete in the long-awaited transfer-of-rights (TOR) oil bidding round, the largest offer of crude and gas reserves in the nation's history. If all the areas received a bid, Brazil's government could have netted 106.5 billion reais ($26.7 billion) in signing bonuses, offering breathing room for a tight federal budget and cementing Brazil's ascendance as Latin America's oil powerhouse. The latest updates showed Sepia and Atapu oil blocks received no bids. The Bovespa fell 0.9% from its record high, with shares in food processor JBS SA extending losses for a second day after top prosecutor requested the annulment of plea bargain deals previously signed with former executives of the company. The country's largest airline, Gol Linhas Aereas Inteligentes edged higher after reporting a 13% rise in demand for its flights in October. Losses in the real also came after Brazil central bank chief Roberto Campos Neto said the consolidation of benign inflation expectations should allow the central bank to undertake another interest rate cut of the same level as at its policy meeting in October. On Oct. 30, the bank cut its benchmark interest rate to an all-time low of 5%. The Chilean peso gained 0.8%, while the Colombian and the Mexican pesos rose marginally as the dollar wilted amid a lack of new developments in U.S.-China trade talks. Global markets rallied on Tuesday after signs the United States and China were working to narrow their differences enough to sign a "phase one" trade deal as early as this month. Trade hopes, tied to upbeat data from the United States, have eased some fears of a global recession.

Key Latin American stock indexes and currencies at 1421 GMT:

Stock indexes Latest Daily %


MSCI Emerging Markets 1068.14 -0.29MSCI LatAm 2777.84 -1.44Brazil Bovespa 107724.17 -0.92Mexico IPC 0.00 0Chile IPSA 4611.72 -2.5Argentina MerVal 36901.81 0.086Colombia IGBC 13567.12 0Currencies Latest Daily %


Brazil real 4.0414 -1.21Mexico peso 19.2132 -0.07Chile peso 741 1.04Colombia peso 3303.94 0.09Peru sol 3.3358 0.04Argentina peso (interbank) 59.6500 0.09

(Reporting by Sruthi Shankar in Bengaluru and Luana Maria Benedito at Sao Paulo; Editing by Bernadette Baum)