* Brazil inflation above central bank’s target * U.S. imposes fresh sanctions on Russia oil trade * MSCI FX down 0.3%, stocks off 0.9% By Purvi Agarwal and Pranav Kashyap Jan 10 – Indexes tracking Latin American currencies and stocks dove on Friday, responding to a robust employment report from the United States as it stoked fears of prolonged high interest rates in the world’s largest economy. MSCI’s index tracking Latin American currencies dipped 0.3%, while its counterpart for stocks was down nearly 1%. Despite the downturn, the stock index was still poised for its first gain in five weeks. The Brazilian real weakened by 1%, marking its worst day since late December, following domestic inflation data that exceeded the central bank’s target range. The local stock index also took a hit, falling 0.5%. “The inflation numbers in Brazil actually came relatively in line with expectations … the only thing that can cool and get the market spinning in the opposite direction is improved fiscal commitment and on the government side,” said Alejandro Cuadrado, managing director and global head of FX and LatAm strategy at BBVA. As the dollar index surged to a two-year high, U.S. Treasury yields climbed, with the benchmark 10-year note reaching its highest point since November 2023. This movement was fueled by an employment report that highlighted accelerating job growth and a decrease in unemployment. “The payroll today, which was particularly strong, validates some of the recent movements we have had – a very strong climb in the U.S. Treasuries yield – in the expectations for the Fed to pause in the in the next few meetings,” said Cuadrado. “The U.S. dollar and Treasury movement is so strong and overpowering, that the emerging markets are sidelined.” Traders adjusted their forecasts, now anticipating a single rate cut in 2025, possibly as late as June. Mexico’s peso fell 1%, on track for its fourth session of declines. The country’s economy minister, Marcelo Ebrard, said Mexico will a find a solution to avoid the imposition of tariffs by the United States. A combination of Donald Trump’s victory in the presidential election bringing along the threat of tariffs, and the Fed taking a hawkish stance, pushed investors away from riskier EM assets, which ended the last quarter of 2024 on a dour note. In Argentina, shares of YPF reversed course and were last down 0.5%. J.P.Morgan upgraded the stock to “overweight” from “neutral” and hiked its price target by $34.50 per depository share. The broader Merval index dropped 1.4%. In Peru, the sol nudged 0.2% lower following the central bank’s decision to cut its benchmark interest rate on Thursday. Venezuela’s international bonds, already languishing at deeply distressed levels between 11 and 15 cents – traded a touch lower after the United States imposed new sanctions. The outgoing Biden administration slapped measures on eight Venezuelan officials and increased to $25 million the reward it is offering for the arrest of President Nicolas Maduro on the day of his inauguration to a third term following a disputed election last year. Maduro and his aides have always rejected sanctions by the U.S. and others, saying they are illegitimate measures that amount to an “economic war” designed to cripple Venezuela. HIGHLIGHTS: ** US hits Russian oil with toughest sanctions yet in bid to give Ukraine, Trump leverage Key Latin American stock indexes and currencies: Equities Latest Daily % change MSCI Emerging Markets 1055.78 -1 MSCI LatAm 1869.89 -0.94 Brazil Bovespa 119150.56 -0.53 Mexico IPC 49774.27 -0.07 Chile IPSA 6813.28 0.16 Argentina MerVal 2789859.63 -1.41 Colombia COLC 1408.55 0.09 Currencies Latest Daily % change Brazil real 6.099 -1.04 Mexico peso 20.6942 -1.05 Chile peso 1009.95 -0.39 Colombia peso 4344.75 -0.46 Peru sol 3.771 -0.24 Argentina peso 1,036.5 0.05 Argentina peso 1,205.0 1.23
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