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EMERGING MARKETS-Brazil stocks drop 1 pct, Argentine bonds rise for 2nd day
June 20, 2014 / 7:11 PM / 3 years ago

EMERGING MARKETS-Brazil stocks drop 1 pct, Argentine bonds rise for 2nd day

By Walter Brandimarte
    RIO DE JANEIRO, June 20 (Reuters) - Brazilian stocks and
currency dropped on Friday as investors pocketed part of recent
gains in a low-volume session squeezed between a local holiday
and the weekend.
    Other Latin American bourses also posted losses as a recent
Wall Street rally appeared to fizzle out, leaving markets
susceptible to profit-taking, but prices of Argentine bonds rose
for a second consecutive session on speculation of a negotiated
solution for the country's debt impasse.
    Brazil's benchmark Bovespa index reopened after a
Thursday national holiday with 1 percent slide. So far this
month, however, the index has gained over 6 percent on bets that
a more market-friendly government next year could benefit shares
of state-run companies.
    Some traders said profit-taking in Brazil was encouraged by
a Thursday opinion poll that showed President Dilma Rousseff,
often criticized by her interventionist policies, stopped losing
votes ahead of October's presidential elections. The same poll
showed that her popularity continued to sink, however.
    Other traders warned that thin trading volumes during the
World Cup soccer tournament were exacerbating market moves.
    "There is little trading volume and, after Wednesday's
strong gains, part of the market is in the mood to take
profits," said Pablo Spyer, a director at Mirae Asset Securities
Brasil. "Volumes are low during these days of World Cup." 
    Brazil hosts the soccer tournament until July 13 and,
especially in Latin American countries, trading often slows down
as market participants watch the games.
    In Mexico, the IPC stock index lost 0.3 percent after
four consecutive sessions of gains. Benchmark Wall Street
indexes eked out a sixth day of gains but analysts warned the
rally is running out of gas now.
    In currency markets, the Brazilian real lost 0.1
percent while the Mexican peso rose 0.2 percent in a
tepid session.
    Prices of Argentine bonds rose for a second consecutive
session, recouping part of recent sharp losses, as investors
hoped for a negotiated solution between Argentina and bond
holders, known as holdouts, who did not accept the country's
debt restructuring following its $100 billion default in
    Fueling that expectation, Argentine President Cristina
Fernandez said on Friday that her government would negotiate
with all the country's creditors. 
    Fears that Argentina could default on its debt increased
after a U.S. judge ruled that the country cannot continue to pay
investors who accepted the debt restructuring unless it also
pays the holdouts who are demanding full payment for the
defaulted bonds.
    Argentina's dollar-denominated 2017 Global bond
 rose 2.28 points in price to bid 86.67 to the
dollar, while its 2033 global bond jumped 2.95
point in price to 78.23 to the dollar. 
    "The consensus view is still for a negotiated solution that
avoids a technical default," Siobhan Morden, head of Latin
America strategy at Jefferies in New York, wrote in a research
    She warned, however, that it does not appear that officials
are ready to begin negotiations or a workaround solution. "We
assume a protracted process before officials identify a
solution," she said, adding that she no longer sees Argentina as
a medium-term positive credit event of regime change but rather
a short-term negative event of technical default.
 Key Latin American stock indexes and currencies at 1850 GMT:
 Stock indexes                   daily %    YTD %
                                  change   change
 MSCI Emerging          1044.34    -0.53     4.71
 MSCI LatAm             3402.68    -0.72     7.08
 Brazil Bovespa           54669    -0.97     6.14
 Mexico IPC            42819.41    -0.32     0.22
 Chile IPSA             3867.99    -0.66     4.56
 Chile IGPA            18882.47    -0.53     3.60
 Argentina MerVal       7347.64    -4.91    36.29
 Colombia IGBC         14328.18     0.76     9.62
 Peru IGRA             16670.18     0.03     5.82
 Venezuela IBC          2154.35  #N/A      -21.28
 Currencies                      daily %    YTD %
                                  change   change
 Brazil real             2.2305    -0.08     5.66
 Mexico peso            12.9924     0.22     0.29
 Chile peso               555.9     0.16    -5.36
 Colombia peso           1882.8    -0.04     2.61
 Peru sol                 2.805    -0.07    -0.43
 Argentina peso          8.1275     0.03   -20.12
 Argentina peso            12.4    -0.81   -19.35
 Turkish lira            2.1415     0.14         
 South African rand      10.676     0.63         
 Russian rouble         34.4699    -0.29         

 (Additional reporting by Guillermo Parra-Bernal in Sao Paulo;
Editing by Lisa Shumaker)

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