February 2, 2018 / 5:22 PM / a year ago

EMERGING MARKETS-LatAm markets fall on U.S. rate hike prospects after wage data

    By Bruno Federowski
    SAO PAULO, Feb 2 (Reuters) - Latin American markets
retreated on Friday after data showing U.S. job growth surged in
January and wages increased, lifting expectations of faster U.S.
interest rate hikes, which could dampen demand for risky assets.
    The robust employment report bolstered expectations of price
pressures that could drive inflation back towards the official
    It underscored the strong momentum in the economy, raising
the possibility that the Federal Reserve could be a bit more
aggressive in raising interest rates this year. The U.S. central
bank has forecast three rate increases this year after raising
borrowing costs three times in 2017.
    Higher U.S. rates could lessen demand for risky assets,
which typically offer higher yields. That perception drove
widespread profit-taking on emerging markets, which had
undergone a sharp rally in the first month of the year.
    The currencies of Brazil, Mexico, Chile
 and Colombia fell between 0.9 percent and 1.6
    Also curbing demand for Brazilian assets were concerns over
an unpopular bill cutting social security spending, which
investors see as key to fueling long-term economic growth.
    The pension bill, which is scheduled for a key vote in the
lower house in the week of Feb. 19, still does not have enough
support for congressional approval, the cabinet minister in
charge of political affairs said on Thursday.
    "Local caution adds to risk aversion worldwide, bumping the
dollar up against the Brazilian real," Spinelli brokerage trader
José Amado said.
    Brazil's benchmark Bovespa stock index led the
losses among Latin American stock markets, weighed down by
blue-chips such as lender Itaú Unibanco Holding SA
and Banco Bradesco SA and miner Vale SA.
    Shares of Embraer SA, however, soared as much as
9.3 percent on reports that Boeing Co has sought the
Brazilian government's approval of a partnership with the
planemaker that would create a new company focused on commercial
    Key Latin American stock indexes and currencies at 1655 GMT:
 Stock indexes                               daily %   YTD %
                                              change  change
 MSCI Emerging Markets              1229.90     -1.5    7.79
 MSCI LatAm                         3144.58    -2.56    14.1
 Brazil Bovespa                    84187.36    -1.53   10.19
 Mexico IPC                        50433.63    -0.31    2.19
 Chile IPSA                         5814.99    -0.81    4.50
 Chile IGPA                        29251.62    -0.72    4.54
 Argentina MerVal                  32884.85    -5.07    9.38
 Colombia IGBC                     12210.00    -0.92    7.38
 Currencies                                  daily %   YTD %
                                              change  change
 Brazil real                         3.2181    -1.55    2.96
 Mexico peso                        18.5400    -1.03    6.25
 Chile peso                           602.5    -0.85    2.02
 Colombia peso                      2840.28    -1.64    4.99
 Peru sol                             3.217    -0.19    0.62
 Argentina peso (interbank)         19.4950    -0.59   -4.59
 Argentina peso (parallel)            19.88     0.25   -3.27
 (Reporting by Bruno Federowski; Editing by Susan Thomas)
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