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Latam stocks, FX rebound as soft US data supports rate cut hope



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U.S. data eases rate fears

Brazil rate decision on Wed

Chile central bank seen cutting rates

By Sruthi Shankar

June 18 (Reuters) -A gauge of Latin American stocks rebounded from eight-month lows on Tuesday and currencies stabilized as softer-than-expected U.S. retail sales data supported expectations of interest rate cuts from the Federal Reserve.

The MSCI's index of Latam equities .MILA00000PUS jumped 1.2%, tracking modest gains on Wall Street. The benchmark touched its lowest since October 2023 on Monday. .N

Helping the region's currencies on Tuesday, the dollar eased after data showed U.S. retail sales barely rose in May and numbers for the prior month were revised significantly lower, suggesting the Fed could start cutting rates soon.

"U.S. economy growth downshifted in the first half of 2024, putting more pressure on businesses to discount and keep products moving off of their shelves. That will help reduce consumer goods inflation in the second half of the year," said Bill Adams, chief economist for Comerica Bank.

"The soft retail sales report adds to confidence that the Fed will begin to cut interest rates in a few months."

Developing world markets have come under pressure in recent weeks on concerns about U.S. rates staying elevated and political shifts across world economies driving reforms, which they fear will be unfavorable for businesses.

Brazilian President Luiz Inacio Lula da Silva criticized the central bank saying its chief, Roberto Campos Neto, was harming Latin America's largest economy, while signaling he will appoint a substitute who is not swayed by market jitters.

The central bank in its meetings on Tuesday and Wednesday is widely expected to pause its easing cycle.

Brazil's Bovespa .BVSP edged up 0.5% after hitting a seven-month low hit in the previous session.

Petrobras PETR4.SA rose 2% even as the state-run oil giant said it had agreed to join a government tax debt renegotiation program that would result in an estimated 11.9 billion reais ($2.19 billion) hit to its second-quarter net income.

The Chilean peso CLP= steadied ahead of a monetary policy decision later in the day. The Andean country's central bank is expected to lower its benchmark interest rate by 25 basis points (bps) to 5.75%, a poll showed.

Elsewhere, the Hungarian forint EURHUF= firmed against the euro after the central bank cut its base rate by 25 bps to 7%, as expected, opting for the smallest cut in its 14-month-old easing cycle.

Deputy Governor Barnabas Virag said in a press briefing that there is "limited room" for rate cuts from July.


Key Latin American stock indexes and currencies:



Latest

Daily % change

MSCI Emerging Markets .MSCIEF

1082.20

0.74

MSCI LatAm .MILA00000PUS

2175.34

1.2

Brazil Bovespa .BVSP

119766.33

0.53

Mexico IPC .MXX

53109.99

1.36

Chile IPSA .SPIPSA

6527.50

0.32

Argentina MerVal .MERV

1582860.23

0.031

Colombia COLCAP .COLCAP

1390.50

0.86




Currencies

Latest

Daily % change

Brazil real BRBY

5.4041

0.32

Mexico peso MXN=D2

18.4210

0.47

Chile peso CLP=CL

935.5

-0.04

Colombia peso COP=

4085.66

1.13

Peru sol PEN=PE

3.7756

0.17

Argentina peso (interbank) ARS=RASL

905.5000

-0.22



Reporting by Sruthi Shankar in Bengaluru
Editing by Marguerita Choy

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