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Brazil's Lula stable in ICU
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MSCI Latam FX index flat; stocks off 0.3%
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Brazil's CPI at 0.39% in Nov
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J.P. Morgan expects Banxico to cut by 50 bps
(Updates with afternoon trading)
By Pranav Kashyap and Johann M Cherian
Dec 10 (Reuters) - Most Latin American currencies edged
higher on Tuesday, as investors geared up for upcoming central
bank decisions in the region, with the Brazilian real
spearheading gains.
The real firmed 0.3% after data showed inflation in
the region's largest economy exceeded expectations in November,
ahead of a widely anticipated acceleration in the monetary
tightening cycle by its central bank on Wednesday.
Analysts say increased fiscal spending has been one of the
main sources of price pressures. However, Brazil's nominee for
monetary policy director at the central bank, Nilton David,
dismissed concerns that the country's fiscal situation had
deteriorated to such an extent that interest rates had become
ineffective at controlling inflation.
Still, Michael Pfister, FX analyst at Commerzbank Research
said, "(The Brazilian government is) spending way too much and
the economy is not really in need of that."
"So do you have a very strong economy, partly financed by
this high spending, which is not necessary, so the market is
very skeptical that this is sustainable and is helpful at all."
In spite of the central bank's monetary tightening, the real
has logged the steepest declines this year among major Latam
currencies and is trading near record lows.
Investors added to rate hike bets and are now pricing in a
76% chance for a 100 basis point hike in the Selic on Wednesday.
Still, yields on Brazilian bonds
eased slightly on the day.
Markets also monitored updates on President Luiz Inacio Lula
da Silva's health after an emergency surgery. He is stable and
being monitored in the intensive care unit.
More broadly, MSCI's index for Latin American currencies
was flat, while Mexico's peso edged up
0.2% against the greenback.
J.P. Morgan expects the Mexican central bank to cut interest
rates by 50 basis points at its policy meeting later in the
week, compared to a 25 bps cut earlier, after the inflation
report on Monday.
Copper producer Chile's peso slipped 0.5%, tracking
weak prices of the red metal. A central bank poll showed
analysts expect the institution to lower its benchmark interest
rate by 25 basis points to 5% at its monetary policy meeting
next week.
Fellow copper exporter Peru's sol edged up 0.2% in
thin trading, while Colombia's peso was flat.
On the equities front, an index tracking
Latam stocks eased 0.3%, after Monday's 1.3% advance.
Brazil's Bovespa added 0.7%, while Mexico's
benchmark index lost 1.3%.
Peru's main stocks index rose 1.3%. Argentina's
Merval index slid 1%. Argentina is expected to report
inflation data on Dec. 11 and a poll showed analysts expect its
consumer price index to rise 2.8% in November.
Key Latin American stock indexes and currencies:
Latin American market
prices from Reuters
MSCI Emerging Markets 1110.65 -0.3
MSCI LatAm 2018.84 -0.29
Brazil Bovespa 128116.88 0.71
Mexico IPC 51500.55 -1.32
Chile IPSA 6720.06 0.09
Argentina Merval 2205912.6 -1.029
1
Colombia COLCAP 1382.45 0.22
Brazil real 6.0578 0.35
Mexico peso 20.178 0.23
Chile peso 974.17 -0.53
Colombia peso 4367 0.05
Peru sol 3.71 0.22
Argentina peso (interbank) 1016 0.00
Argentina peso (parallel) 1050 1.41