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EMERGING MARKETS-Brazil markets slump as pension reform odds fade
December 7, 2017 / 1:43 PM / 6 days ago

EMERGING MARKETS-Brazil markets slump as pension reform odds fade

    By Bruno Federowski
    SAO PAULO, Dec 7 (Reuters) - Brazilian markets plummeted on
Thursday after President Michel Temer's administration failed to
gather enough support from lawmakers to put a pension overhaul
plan to a vote.
    A senior lawmaker said on Wednesday that the government's
coalition expected to have enough votes later that day to pass
the bill, which investors see as crucial to curbing public debt.
    But a failure to do so led policymakers to put off a
decision, originally planned for Wednesday, to formally schedule
the vote, suggesting that the administration might have
overestimated its clout in Congress.
    "The market is anticipating that the pension reform will not
be voted this year," said Coinvalores brokerage head of strategy
Paulo Nepomuceno.
    Delaying the vote on the unpopular measure to 2018 would put
it close to next year's elections, a move most investors see as
reducing its likelihood of approval.
    The Brazilian real weakened 1.7 percent, its biggest
one-day decline in more than a month. The benchmark Bovespa
index fell 2 percent, with all stocks there declining.
    Yields paid on long-term interest rate futures
jumped as investors demanded higher returns, but short-term
contracts were flat after the central bank slashed interest
rates to an all-time low and hinted at an additional, smaller
reduction in February.
    The yield curve indicated a 60 percent likelihood of a
25-basis-point cut at the next meeting of the central bank and a
40 percent chance that it would stand pat, traders said.
    Other Latin American currencies mostly weakened due to
expectations that the United States will push through a tax
overhaul.
    U.S. Senate Republicans agreed to talks with the House of
Representatives on sweeping tax legislation on Wednesday, amid
early signs that lawmakers could bridge their differences and
agree on a final bill ahead of a self-imposed Dec. 22 deadline.

    The tax plan could boost economic growth and inflation,
forcing the U.S. Federal Reserve to raise interest rates at a
faster-than-expected pace in coming months. Higher U.S. rates
tend to drain funds away from emerging markets.
    
    Key Latin American stock indexes and currencies at 1320 GMT:
 Stock indexes                                daily %    YTD %
                                     Latest    change   change
 MSCI Emerging Markets               1099.12    -0.19    27.71
 MSCI LatAm                          2682.24    -2.11    17.06
 Brazil Bovespa                     71843.10    -1.95    19.29
 Chile IPSA                          4877.36    -0.22    17.49
 Chile IGPA                         24564.45     -0.2    18.47
 Argentina MerVal                   26470.45        0    56.46
 Colombia IGBC                      10843.42        0     7.06
 Venezuela IBC                       1354.40        0   -95.73
                                                              
 Currencies                                   daily %    YTD %
                                               change   change
                                      Latest           
 Brazil real                          3.2867    -1.73    -1.14
 Mexico peso                         18.9275    -0.31     9.60
                                                       
 Chile peso                            655.7    -0.36     2.29
 Colombia peso                          3013    -0.23    -0.38
 Peru sol                              3.235    -0.03     5.53
 Argentina peso (interbank)          17.2525     0.25    -7.98
                                                       
 Argentina peso (parallel)              17.9     0.34    -6.03
                                                       
 

 (Reporting by Bruno Federowski; Editing by Lisa Von Ahn)
  

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