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Bonds News

EMERGING MARKETS-Brazil's real bounces; Mexican cenbank cuts rates as expected

    * Real finds support in improving service sector data
    * Mexican cenbank cuts rates by 50 bps to lowest level in 4
years
    * Peru's cenbank decision awaited
    * Brazil's Eletrobras, BRF fall after results

 (Updates prices)
    By Shreyashi Sanyal and Susan Mathew
    Aug 13 (Reuters) - An expected interest rate cut in Mexico
did not cause big moves in the country's currency on Thursday,
while Brazil's real bounced on signs of recovery in the
country's battered service sector. 
    In line with expectations, the Bank of Mexico cut rates by
50 basis points to 4.50% - the lowest in four years. The bank
flagged a possible uptick in inflation before the end of 2020,
but saw significant downside risks to the economy.
    After paring gains slightly after the decision, the Mexican
peso climbed back to levels before the cut - up 0.8% at
two-week highs. 
    The bank's decision, however, was not unanimous, with one
board member favoring a smaller reduction. 
    But, "there was not enough concern or commitment as of yet
to change our view for another 50bp cut in September," said
Sacha Tihany, deputy head of emerging markets strategy at TD
Securities, "as Banxico's 12- and 24-month ahead forecasts for
inflation remain around the 3% target." 
    Brazil's real rose 1.5%, rebounding from declines in
the previous session, as data showed services activity 
increased in June for the first time in five months.

    Still, spiking COVID-19 cases, a dovish central bank and
worsening ties between the United States and China have
increased the pressure on the real, which has fallen around 25%
so far this year. 
    Most other currencies in Latin America fell against a weaker
dollar, with market participants watching for a weekend meeting
between the United States and China to discuss their Phase 1
trade pact and any developments over a deadlocked U.S. stimulus
package.
    Among stocks, Sao Paulo Bovespa index fell 1.1%. 
    Power utility Eletrobras slid more than 6% after
posting a 17% slide in net income, while Via Varejo
topped the index after the electronics retailer reversed
year-ago losses.
    Meat processor BRF SA slumped 7.5% on posting a
smaller profit as the COVID-19 crisis increased costs and hit
exports. 
    Brazilian meat processors came under pressure on Thursday
after a Chinese local government identified a Brazilian meat
plant, Aurora, as the source of chicken wings that tested
positive for the novel coronavirus.
    Main indexes in Colombia and Argentina
rose, while Chilean stocks lost more than 1%.
    Peru's sol fell 0.1% ahead of a central bank meeting
later in the day. Credit Suisse analysts expect the bank to hold
its key interest rate steady at 0.25%.
             
    Key Latin American stock indexes and currencies at 1945 GMT:
  Stock indexes           Latest   Daily %
                                   change
 MSCI Emerging Markets    1096.05     0.19
                                   
 MSCI LatAm               2006.55     0.32
                                   
 Brazil Bovespa         100954.03    -1.14
                                   
 Mexico IPC              38589.88    -0.11
                                   
 Chile IPSA               3993.06    -1.08
                                   
 Argentina MerVal        49592.12    1.269
                                   
 Colombia COLCAP          1146.57     0.42
                                   
                                          
      Currencies          Latest   Daily %
                                   change
 Brazil real               5.3712     1.50
                                   
 Mexico peso              22.1936     0.67
                                   
 Chile peso                 792.5     0.00
                                   
 Colombia peso            3769.57    -0.39
                                   
 Peru sol                  3.5698    -0.11
                                   
 Argentina peso           73.1000    -0.07
 (interbank)                       
                                   
 
 (Reporting by Shreyashi Sanyal in Bengaluru; Editing by Dan
Grebler)
  
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