|Day's Range||5,041.52 - 5,072.83|
|52 Week Range||4,798.35 - 5,515.95|
* Trump to restore tariffs on metal imports from Brazil, Argentina * Latam FX gain as dollar drops after weak U.S. manufacturing data * Brazil stocks rise after strong manufacturing data * Chilean peso firms as central bank intervention kicks in By Susan Mathew Dec 2 (Reuters) - A dollar weakened by poor U.S. economic data helped Latin American currencies brush off the re-imposition of U.S. tariffs on steel and aluminum imports from Brazil and Argentina on Monday. Brazil's real firmed 0.4% with a spot auction by the central bank supporting the currency, while the Argentine and Mexican pesos were flat against a dollar that slid on weak U.S. manufacturing data. Surprising officials in the two South American countries, U.S. President Donald Trump said on Monday he would restore tariffs on U.S. steel and aluminum imports, accusing them of devaluing their currencies to the detriment of U.S. farmers.
(Bloomberg) -- Chilean stocks and the peso rallied the most in a decade on optimism an agreement over a new constitution will help end protests and riots that threatened to upend the country’s economy.The benchmark stock index closed with a gain of 8.1%, while the peso added 3.3%, both posting the world’s best performances on Friday. Bond spreads narrowed and the cost to insure against default dropped.It was the first sign of significant relief for Chilean assets after they came under pressure a month ago following the government’s move to raise subway fares. The deadly and violent upheaval that followed -- unprecedented in a country seen as an oasis of stability in the region -- sent the currency tumbling to a record low, hammered stocks and briefly cost Chile its title as Latin America’s safest borrower.Bleary-eyed lawmakers announced an agreement over a mechanism to rewrite the constitution at about 2:30 a.m. Friday, following another day of demonstrations and arson attacks. While protesters have a long list of social-justice grievances, replacing a constitution that was penned during the dictatorship of Augusto Pinochet was a key demand.“We don’t know if this will put an end to all the protests, but it will certainly help,” said Rodrigo Rojas, who manages $500 million at Toesca Asset Management. “The agreement improves visibility for the market versus what we had just 24 hours ago.”Leading the WayThe protests may cost as many as 300,000 jobs, saw almost one in three supermarkets vandalized and led to 20 deaths. The police appeared to lose control of the streets at times.The breakdown in social cohesion was a surprising turn of events for a country that, at least in financial circles, was considered the best house on a bad block, heading toward developed-nation status after years of fiscal prudence and relative stability fueled economic growth.But the nightly images of destruction over the past month brought the IPSA stocks index down to 13 times estimated earnings, the lowest since early 2016. Inversiones La Construccion SA, with interests in pension funds and healthcare, two industries in the cross-hairs of protesters, was one of the best performers Friday, rising 26%. Builders Salfacorp SA and Besalco SA also leaped.Swap rates in pesos plunged. By Thursday, the market had priced out almost any further monetary policy easing as the peso rout continued. In a sharp about-face today, the two-year swap fell 23 basis points, while five-year and 10-year swap rates dropped the most in at least a decade.Of course the social turmoil in Chile didn’t happen in isolation. Populist governments have been elected in Mexico, Brazil and Argentina. Venezuela is basically a failed state. Peru’s president recently dissolved Congress after his predecessor was ousted amid corruption allegations. And in Bolivia, enraged supporters of former President Evo Morales are clashing with police as his replacement tries to establish order.In Chile, there’s broad popular support for reform -- almost three-fourths of those surveyed late last month said protests should continue.Under Friday’s accord, Chile will hold a referendum in April on whether to have a new constitution and which body would be in charge of drafting it. One option will be a newly elected Constituent Convention, the other a mix between the Congress and a Convention.Key ClauseKey to today’s market rally is a line saying that all clauses must be approved by a two-third majority. That could potentially make it easier to avoid radical change. What has worried analysts is the potential for the economic and social model that has supported 30 years of outperformance in Chile relative to its emerging-market peers may be scrapped.“Consensus on content will be needed,” Fernan Gonzalez, an analyst at Banchile, said in a note. “Equities should re-rate after the agreement and the sell-off,“ he said, naming Banco Santander Chile, Cencosud Shopping SA, Empresas CMPC SA, Enel Chile SA as its top picks.Chile is well positioned to shift toward higher taxes and increased spending. After racking up huge budget surpluses during the commodities boom, the nation can afford to spend a few more points of gross domestic product on health and pensions. The government spends about 25% of GDP, compared to 38% in Brazil and Argentina.Still, the Chile of the future will likely have a higher tax burden, higher fiscal spending and possibly more debt to satisfy protesters’ demands for bigger pensions, better health care and less economic inequality.“This isn’t free,” said Sebastian Ide, head of trading at Banco de Chile in Santiago. “To think that asset prices will just go back to where they were is blindness. This peace will help with consumer spending, but for growth you need investment. Investment won’t come until we know where we are with the constitution and fiscal spending.”(Updates with closing market prices.)\--With assistance from James Attwood.To contact the reporters on this story: Eduardo Thomson in Santiago at email@example.com;Sebastian Boyd in Santiago at firstname.lastname@example.orgTo contact the editors responsible for this story: Daniel Cancel at email@example.com, Philip Sanders, Brendan WalshFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- A national strike failed to paralyze Chile on Tuesday, yet offered little respite for a government reeling from the worst civil unrest in a generation.While port workers and some miners downed tools, Santiago’s public transport system kept operating, building works continued and shops remained open. Most of the giant copper mines in the north were unaffected.“The border posts and airports are working normally,” the deputy Interior Minister Rodrigo Ubilla said. “Turn out for the strike has been quite low” in the state sector.Protesters had hoped the strike would raise the economic cost of the unrest, ramping up pressure on the government to cede to demands for better healthcare, education, pensions and transport. As it was, it showed the limitations of a mass movement that remains largely leaderless. That may come as little comfort for the government though.“The strike showed that this isn’t going to be resolved with a simple list of demands, but through a long, complex process of dialogue with citizens,” said Noam Titelman, a research assistant at the Universidad de Chile.Political parties, social movements and even the labor unions have been bypassed by the protests and riots, he said.New Constitution“It has gone badly for anyone who tried to become their spokesman,” Titelman said.As an example of that, thousands turned out for fresh demonstrations in Santiago and other major cities on Tuesday, blocking the main thoroughfares in largely peaceful protests. Yet, there were no public speakers at the events.In an attempt to placate the protesters, Chile’s center-right government gave its backing to plans to write a new constitution on Sunday.The announcement created near panic in financial markets, which feared a new constitution would undermine the free-market policies that have created enormous wealth in Chile, and enormous inequality. The peso fell as much as 7% over the past two days, dropping to a record low, while the benchmark IPSA stock index slid 3.6% over the same period.Only a verbal intervention from the central bank, which said it had the tools available to control the volatility, prevented the peso from going still lower.As the protests near the end of a fourth week and police brace for another night of skirmishes, Chile’s social upheaval shows no signs of coming to an end.\--With assistance from Maria Jose Campano, Eduardo Thomson and Sebastian Boyd.To contact the reporter on this story: Philip Sanders in Santiago at firstname.lastname@example.orgTo contact the editors responsible for this story: Daniel Cancel at email@example.com, James AttwoodFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- A wave of civil unrest has turned Latin America’s best-rated sovereign credit into the worst performer in emerging markets this month. It may be the start of a longer malaise.Losses in Chile’s dollar-denominated bonds have accelerated this month as the economic cost of three weeks of protests and riots becomes increasingly apparent. Investment has stalled, shops are closed and tourists are staying away amid the biggest social uprising since the return of democracy in 1990.The dollar notes due in 2050 and 2047 posted the first and third worst returns among all 74 emerging and frontier markets in the Bloomberg Barclays Emerging Markets Sovereign Index. Chilean bonds handed investors a loss of 3.1% in the first seven days of the month, while the benchmark fell 0.3%.Chile’s political and economic landscape has been turned on its head by the unexpected explosion of social rage. Twenty people have been killed and more than a quarter of all supermarkets have been vandalized, ransacked or burnt to the ground. It has come as a shock to the system for a country that was regarded as the most stable and well-managed in Latin America.“Chilean markets, the economy, social-political system are undergoing regime shift,” said Arthur Budaghyan, the chief emerging-market strategist at BCA Research Inc. in Montreal. “As investors, we have to be open to the idea that this will entail new macro policies that will be more populist.”Still, the nation’s credit risk is the lowest in the region and among the smallest in emerging markets. The cost of hedging against a Chilean default over the next five years is half that of Mexico and a third of that in Brazil.Rising CostPresident Sebastian Pinera has announced a social agenda costing $1.2 billion, including a minimum monthly income of 350,000 pesos ($470) that will benefit more than half a million people as he tries to end the disturbances.“This shock will deteriorate economic activity and investment,” said Felipe Labbe, an economist at Deutsche Bank based in New York. “Subsidies and required reforms included in the recent social agenda will impact the fiscal position and create more deficit.”Yet, if Pinera he has any hope of quelling the unrest, he will have to go further. Protesters are demanding better pensions, healthcare, education and public transport, as well as a new constitution. They also want Pinera to go.Finance Minister Ignacio Briones has cut the government’s growth forecast for the year to about 2% from the 2.6% predicted in September. He estimates the direct costs of the riots at between $2 billion and $3 billion.As the protests go on and the pressure on Pinera builds, Budaghyan says Chilean assets are likely to underperform for six months to a year and he recommends shorting the peso versus the U.S. dollar and downgrading allocation to Chilean stocks from overweight to neutral.Market ImpactCapital Economics economist Quinn Markwith says there is a good chance that protests will lead Chile’s gross domestic product to contract in the fourth quarter.The benchmark IPSA stock index has fallen 10% since the troubles started on Oct. 18. The index hit a two-and-a-half year low on Wednesday.The peso has been little better. The currency was the worst performer of 24 emerging-market currencies in October after the Argentine peso, reaching a 16-year low on Tuesday.Even external bonds, which had been more resilient, started to decline this month as foreign investors turn more cautious. Chile’s dollar-bond spreads have widened over the past week after narrowing earlier this year.But as protests drag on and an end to the clashes seems out of sight, even foreign investors are turning more cautious.Technical analysis also doesn’t favor a rebound in Chilean bonds. The nation’s most liquid notes were trading at all-time highs before the protests erupted and some analysts say they continue to be expensive even after the recent correction. Bonds due in 2050 were traded at around 102.6 cents on the dollar on Friday, from a peak of 115 cents in early September. The bonds due in 2028 were worth 105 cents from 109 cents two months ago.“The limited stock of USD bonds and relatively good fundamentals have benefited Chilean bonds valuations, but now investors are assessing the long-term impact of changes in the economic agenda,” said William Snead, an analyst at Banco Bilbao Vizcaya Argentaria SA in New York. “Even after the recent repricing, Chilean bonds look fairly valued to overvalued when compared to some Gulf Cooperation Council countries as Saudia Arabia, Qatar.”(Updates bond prices in second to last paragraph.)\--With assistance from Sydney Maki and James Attwood.To contact the reporter on this story: Aline Oyamada in Sao Paulo at firstname.lastname@example.orgTo contact the editors responsible for this story: Carolina Wilson at email@example.com, Philip Sanders, Brendan WalshFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Chile's peso slid 1.5% to 737.53 to the dollar, an all-time low and stocks tumbled 3.1% to a eight-week trough. The country's manufacturing production dropped in September from a year ago amid a decrease in mining production, government data showed. Analysts worry about deteriorating economic activity in Chile - the world's biggest producer of copper as a recent political crisis has seen union workers at BHP's Escondida copper miner go on strike.
Adding to overall optimism, the U.S. Trade Representative's office said U.S. and Chinese trade officials were "close to finalizing" some parts of an agreement.
MSCI's index of Latin American stocks and currencies slipped between 0.6% and 1%. Brazil's real fell for a third-straight session. Chile's peso fell to their lowest level since January 2016 as prices of copper, the country's top export, slipped.
The Sao Paulo. index rose 1%, with materials stocks pushing up the index the most. Chilean stocks rose about 0.3% and were slated for a seventh straight session of gains. The Mexican peso rose about 0.4% to near a one-month high.
MSCI's index of Latin American stocks rose 1.3%, holding near a one-month high, mirroring gains across global stock markets.
(Updates prices) By Susan Mathew June 26 (Reuters) - Latin American stocks mostly fell and Brazil's real traded flat on Wednesday, while most other regional currencies firmed on measured optimism around the Sino-U.S. trade dispute. Against a steady dollar, most Latam currencies recovered from losses logged last session after comments by U.S. Federal Reserve officials quashed hopes of a half-point cut in interest rates. Mexico's peso firmed 0.5% after three days of losses, while Colombia's currency rose 0.1% with support from rising oil prices.