Latam stock and forex indexes rise after U.S. inflation data, set for weekly gains

Updated at 3pm ET/2000 GMT

By Amruta Khandekar

Jan 26 (Reuters) –Most Latin American stocks gained on Friday as data pointing to a downward trend in U.S. inflation helped sentiment towards riskier assets, whilelower copper prices weighed on the currencies of Chile and Peru.

MSCI’s index for Latin American stocks .MILA00000PUS jumped 1.3%, on track for its best day since Jan. 5 andset for its first weekly gain in three.

MSCI’s gaugeof currencies .MILA00000CUS edged up 0.2%,on track to gain about that much on the week.

The safe-haven dollar =USD dipped after datashowed U.S. price pressures moderated in December, with markets hoping the data keeps theFed on track tobegin rate cuts by the middle of this year.

Latin American assets have been on shaky grounds in recent weeks as investors pushed back expectations of U.S. rate cuts from March to May due to economic resilience and hawkish comments from policymakers.

With many Latam countries having started an easing cycle, there are concerns that the returns on regional currencies could become less attractive, though some analysts see room for upside ahead.

“The recent repricing of market expectations on the Fed easing cycle beginning in May rather than March has cleaned up positioning and made LatAm markets more appealing,” Societe Generale strategists said in a note, adding the dollar is likely to weaken ahead.

“Overall, we keep our stance of a buy on dips when volatility increases as we believe LatAm’s favorable fundamentals and technicals should keep the region’s FX and rates attractive.”

Chile’s peso CLP= dropped 1.5%while the Peruvian sol PEN=PE also weakened to 3.7815 per dollar, hurt by a dip in the prices of copper. Both countries are major exporters of the red metal. MET/L

Also weighing on the peso were expectations of a 100 basis points rate cut by Chile’s central bank next week.

The Brazilian real BRL= edged up 0.1% in choppy trade after data showed domestic inflation came in well below market expectations, boosting bets of another 50 basis points rate cut at the central bank’s meeting next week.

The Bovespa index .BVSP gained0.8%, led by gains in energy and materials stocks.

Brazilian airline Gol GOLL4.SA were last down 9.3% afterfiling for bankruptcy protection in the United States on Thursday.

Mexico’s pesoMXN= and Colombia’s pesoCOP= were up 0.2% and 0.7%.

Equities in Chile .SPIPSA and Mexico .MXX added 1.2%and 1.7% respectively, with Mexican stocks set for their best day since Dec. 14.

Argentina’s MerVal index .MERV dropped 2.2%.

MSCI’s index of emerging market (EM) equities .MSCIEF was set for a weekly gain of 1.5%, while a gauge of regional currencies .MIEM00000CUS were on track for their best week since end-December.

Key Latin American stock indexes and currencies at 2000 GMT:

Reporting by Amruta Khandekar and Lisa Mattackal;
Editing by Alison Williams and Diane Craft