EMERGING MARKETS-Mexican stocks drop 1% on inflation data; Chilean peso hovers around two-month lows

Credit: REUTERS/Rodrigo Garrido

By Siddarth S

Jan 9 (Reuters) - Latin American stocks fell more than 1% on Tuesday, dragged down by Mexican shares after data showed a rise in domestic headline inflation, while the Chilean peso hovered around nearly two-month lows, extending declines from the previous session.

Mexican stocks .MXX dropped 1.3% and the peso MXN= fell 0.5%, after domestic headline inflation accelerated for the second month in a row in December, while the closely watched core rate maintained its downward trend, data showed.

"(Mexican) food prices, a positive output and labor market gap, and double-digit wage growth are sources of near-term upside risk to inflation," Goldman Sachs economists said in a note.

"This backdrop, combined with rising non-core inflation pressures and high and sticky services inflation likely reduces the urgency for the central bank to initiate an easing cycle,"

The broader MSCI indexes tracking Latin American stocks .MILA00000PUS slid 1.6% by 1537 GMT, while a basket of regional currencies .MILA00000CUS fell 0.6% against a steady dollar.

Latam assets have had a frail start to 2024 as investors' appetite for risky assets receded as bets on early rate cuts lost some traction.

A batch of mixed U.S. economic data on Friday did little to bring more certainty on the path to reduced borrowing costs, leaving market participants looking towards the next set of U.S. inflation data due later in the week for clarity.

"The (U.S.) labour market is lagging the economy...and you need to see that coming through before you could really have full conviction that rates are going to be cut," said David Rees, senior emerging markets economist at Schroders.

"I don't see that the rate cuts are going to be as aggressive as the market pricing, so there's some point we think there's going to be some kind of repricing," Rees added.

Chile's peso CLP= lost 1.9%, after hitting a nearly two-month low in the previous session partly hurt by lower copper prices.

Colombian stocks .COLCAP and the peso COP= fell more than 1% ahead of inflation data for December.

Argentina's monthly inflation rate likely soared to 28% in December, which would be the highest since early 1990, driven by a sharp devaluation of the peso currency last month by the new government of libertarian President Javier Milei.

Argentina's Merval stock index .MERV declined 1.4%, snapping a seven-day winning streak.

In Europe, Poland's central bank kept its main interest rate on hold at 5.75% on Tuesday, remaining in wait-and-see mode even as it forecast a significant fall in inflation in the coming months.

Key Latin American stock indexes and currencies at 1537 GMT:

Latest

Daily % change

MSCI Emerging Markets .MSCIEF

992.51

-0.43

MSCI LatAm .MILA00000PUS

2582.61

-1.57

Brazil Bovespa .BVSP

131398.79

-0.78

Mexico IPC .MXX

55423.51

-1.34

Chile IPSA .SPIPSA

6069.16

0.21

Argentina MerVal .MERV

1089395.10

-1.404

Colombia COLCAP .COLCAP

1280.28

-1.12

Currencies

Latest

Daily % change

Brazil real BRBY

4.8960

-0.56

Mexico peso MXN=D2

16.9249

-0.64

Chile peso CLP=CL

920

-1.91

Colombia peso COP=

3946.5

-1.61

Peru sol PEN=PE

3.7122

-0.74

Argentina peso (interbank) ARS=RASL

814.3000

-0.05

Argentina peso (parallel) ARSB=

1080

-2.78

Annual change in Mexico’s consumer prices https://tmsnrt.rs/3RUnVAS

Battling inflation in Argentina Battling inflation in Argentina https://tmsnrt.rs/36BZUr1

(Reporting by Siddarth S in Bengaluru; Editing by Sharon Singleton)

((Siddarth.s@thomsonreuters.com;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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