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Latam FX weaker; Brazil stocks cut losses on pension progress

Latin American currencies weakened in quiet trade on Monday, and most while most regional stock indexes tracked Wall Street lower, pension reform optimism helped Brazil stocks retrace earlier losses to end flat. Following a three-day holiday weekend, Mexico’s peso lost 0.3 percent, while the Colombian peso gave up narrow gains from earlier in the session amid surging oil prices. Analysts at Banco Base said in a note that market participants are expected to remain cautious as they await first-quarter U.S. economic data due later this week to gauge global growth momentum. Brazil’s real also turned lower against the dollar, with a closely watched survey showing that economists continue to slash economic growth forecasts for Brazil this year, a day ahead of a key congressional vote on pension reforms.

But stocks in Sao Paulo rebounded from session losses of up to 0.9 percent and closed flat after Labor and Pensions Secretary Rogerio Marinho said there will be some “minor changes” to the pension bill, but insisted the government will not dilute its targeted savings of 1.1 trillion reais ($280 billion) over the next decade. “An agreement tends to facilitate approval of the matter in the congressional committee by a large majority, which demonstrates an improvement in the government’s capacity for political articulation,” said Alexandre Soares, a trader at BGC Liquidez. An overhaul of Brazil’s bloated pension system is considered crucial to narrowing the country’s fiscal deficit. Argentina’s currency weakened over 1 percent, while stocks toppled nearly 4 percent, touching their lowest level since the first trading day of the year. Argentina posted a surplus in the first quarter, but ran a primary fiscal deficit of 13.037 billion pesos ($305.32 million) in March. Under a $56.3 billion financing deal with the International Monetary Fund, the government has agreed to wipe out the primary fiscal deficit this year. Gustavo Ber, an economist at consultancy Estudio Ber, also pointed to some negative market response from measures announced last week aimed at reining in inflation and halting the currency’s decline. The measures were “interpreted as electoral and transitory, said. The country heads into general elections in October. Chilean stocks also fell, but Colombian shares rose with higher oil prices aiding a 2 percent rise in state-oil firm Ecopetrol.

Key Latin American stock indexes and currencies at 2100 GMT:

Stock indexes Latest Daily

pct change

MSCI Emerging Markets 1,089.03 -0.32MSCI LatAm 2,759.50 0.13Brazil Bovespa 94,588.06 0.01Mexico IPC 45,381.22 -0.32Chile IPSA 5,234.30 -0.52Argentina MerVal 30,786.64 -3.9Colombia IGBC 12,981.60 1.4Currencies Latest Daily

pct change

Brazil real 3.9356 -0.09Mexico peso 18.8268 -0.36Chile peso 663.9 -0.30Colombia peso 3,153.88 -0.24Peru sol 3.304 -0.21Argentina peso (interbank) 42.5000 -1.41