EMERGING MARKETS – Stocks cut losses, Latin currencies rally as dollar retreats

* Emerging market stocks pare losses * Latin American stocks and currencies recover * Mexico’s central bank may rise again, minutes say * Chile’s central bank signals end of bullish cycle * Minister Colombian finance minister questions rate hikes (price updates, market activity, commentary) By Susan Mathew and Amruta Khandekar, Oct 13 (Reuters) – Emerging market stocks fell on Thursday, but pared some losses early in the session as the selloff in equities driven by higher-than-expected US inflation data eased. The MSCI index of emerging markets shares fell 1% after falling nearly 2% earlier in the day after data showing a bigger-than-expected rise in US consumer prices in September raised fears of aggressive rate hikes from the Federal Reserve. However, after the initial jolt, global equity markets saw a turnaround as risk sentiment picked up. “There is some element of buying on the downside and continued hopes that there is still potential for a year-end rally,” said Tom Martin, senior portfolio manager at GLOBALT in Atlanta. “However, the fundamentals that underpin the rise of the dollar against other currencies are still there.” Latin American stocks reversed their losses, with Mexican stocks up 0.5% and Colombia’s COLCAP up 1.2%. Currencies in the region also stabilized as the dollar fell amid trade volatility, retreating after hitting a 32-year high against the yen after the data. The Brazilian real was down 0.1% but off session lows, while the Mexican peso was flat. Minutes from the Bank of Mexico’s monetary policy meeting in September showed the central bank’s board would consider future interest rate hikes and signaled lingering inflation risks . The Chilean peso rose 0.7% after falling earlier in the session as the country’s central bank signaled that a 50 basis point hike overnight could signal the end of its tightening cycle. Still, the emerging market currency index is on track for its worst annual performance on record, while stocks are down 31% so far in 2022, on track for their worst year since 2008. Risk sentiment took a hit as markets worried about the outlook for an economic slowdown triggered by central banks aggressively tightening monetary policy to rein in high inflation. Tighter global financial conditions and stubbornly high inflation are clouding the outlook for economies in Latin America and the Caribbean, the International Monetary Fund said Thursday. In Colombia, Finance Minister Jose Antonio Ocampo said raising interest rates would not reduce high inflation because it is a supply-side problem. His remarks follow comments by Colombian President Gustavo Petro last week where he questioned the central bank’s decision to raise its benchmark rate. The Colombian peso rose 0.7%. Its central bank has signaled that more rate hikes are coming. Main stock indices and currencies in Latin America: Stock indices Last daily change in % MSCI Emerging Markets 855.89 -1.09 MSCI LatAm 2163.08 0.36 Brazil Bovespa 114717.87 -0.1 Mexico CPI 45985.02 0 .67 Chile IPSA 4962.12 0.52 Argentina MerVal 140654.23 6.4 121 Colombia Brazilian real 5.2799 -0.16 Mexican peso 19.9964 -0.09 Chilean peso 936.9 0.65 Colombian peso 4569, 83 0.70 Peruvian Sol 3.9685 -0.02 Argentine Peso 151.2900 -0.19 (interbank) Argentine Peso 287 0.70 (parallel) from Nick Zieminski and Paul Simao)

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