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EMERGING MARKETS-Chilean peso rises after rate hike, outperforms Latam peers

* Chilean central bank raises rates to 9.0%, sees more hikes * Brazil’s Vale launches VC initiative to invest in startups (Updates prices, details) By Shreyashi Sanyal and Bansari Mayur Kamdar June 8 (Reuters) – Chile’s peso rose on Wednesday after its central bank raised interest rates overnight and signaled more increases, while Latin American stocks fell as global risk sentiment soured on fears around economic growth amid surging inflation. The peso strengthened 0.3% against the dollar after Chile’s central bank raised its benchmark interest rate by 75 basis points (bps) to 9.0%, and suggested more increases were coming as it battles rising inflation. “The bank considered that the local financial market has performed more favorably than its external peers, and the economy has been receding at a slower-than-expected pace; however, headline inflation has continued to rise,” Credit Suisse analysts wrote in a client note. “We think that this likely puts the floor on the policy rate at 9.5%, assuming the minimum two adjustments of 25bps each.” The central bank also raised its economic forecast, saying the Chilean economy would expand between 1.5% and 2.25% this year, after last year’s solid recovery from the coronavirus pandemic. Santiago stocks fell 1.4%. Latin American equities lagged their emerging market peers that drew comfort from gains in Chinese shares, which ended at their highest level in two months on hopes of a recovery in demand on loosening COVID-19 curbs. Reuters reported that China has widened the gap on the United States in trade terms in large parts of Latin America since US President Joe Biden came into office early last year, according to data, underscoring how Washington is being pushed onto the back foot in the region . The resource-rich South and Central Americas export a number of products to China ranging from industrial metals, oil and agricultural goods. The Mexican peso was subdued as investors eyed its May inflation data on Thursday, while stocks fell 0.9%. Brazil’s real fell 0.2% in volatile trading, extending losses after touching two-week lows in the previous session as the government proposed tax cuts aimed at curbing soaring diesel and gas prices raised concerns about the country’s fiscal health. Brazil’s government is mulling measures to ensure a plan to slash a state fuel tax is reflected in prices at the pump, two sources close to the matter told Reuters. Sao Paulo stocks shed 1.5% and hit over two-week lows, with Vale SA dragging. The miner fell 3.7%. It said it was launching a venture capital initiative called Vale Ventures to invest $100 million in mining startups around the world. Meanwhile, an opinion poll showed Brazil’s leftist leader Luiz Inacio Lula da Silva holding a strong lead against incumbent President Jair Bolsonaro for the October election. Latin American stock indexes and currencies at 1932 GMT: Stock indexes Latest Daily % change MSCI Emerging 1073.39 1.17 Markets MSCI LatAm 2351.57 -1.16 Brazil Bovespa 108245.17 -1.66 Mexico IPC 49722.58 -0.83 Chile IPSA 5284.41 -1.39 Argentina MerVal 89932.70 -AP 1560106. Colombia CO 1.65 Currencies Latest Daily % change Brazil real 4.8823 -0.22 Mexico peso 19.5731 0.04 Chile peso 822.2 0.22 Colombia peso 3795.6 -0.47 Peru sol 3.7546 -0.42 Argentina peso 121.4500 -0.13 (interbank) Argentina peso 205 0.49 (parallel) (Reporting by Shreyashi Sanyal and Bansari Mayur Kamdar in Bengaluru Editing by Mark Potter and Grant McCool)

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