SAO PAULO/MEXICO CITY: Most Latin American stock indexes rallied on Friday, joining global stock markets that notched record highs as upbeat data from the world’s two biggest economies raised economic recovery hopes, while most regional currencies reversed losses to trade higher.
MSCI’s index of Latam stocks hit two-month highs, and looked to end the week in the black for the third straight week, as did its currencies counterpart.
Brazil’s Bovespa index was boosted by an 8.5% surge in shares of apparel retailer Lojas Renner, which confirmed a share offering plan. The company plans to raise roughly 4.5 billion reais in the follow-on, a source familiar with the matter said.
But shares of oil major Petrobras weighed as oil prices fell. The company’s board elected four career executives to head key company divisions, sending a message of some continuity to a market wary of non-expert appointments to lead the company. Chile’s IPSA index hit highs not seen since January last year, with shares of lithium miner Sociedad Quimica y Minera de Chile, known as SQM, up 1.4% and 2.4%, respectively. Reuters exclusively reported that Brazilian private equity firm IG4 Capital has delivered a $916 million bid to buy into holding companies that have large stakes in the second largest lithium producer in the world. Global stock markets notched all-time highs as strong US and Chinese economic data bolstered expectations of a solid global recovery from a coronavirus pandemic-induced slump.
Most Latin American currencies, meanwhile erased session losses as the dollar fell on declining US bond yields, but Chile’s peso underperformed on the day, down 0.7%, as copper prices fell 1%. Brazil’s real firmed 0.8% to extend gains to a fourth straight session, putting it on track for weekly gains of about 1.8% - the best among major Latam currencies this week.
But an unabated rise in COVID-19 infections and the government forecasting three straight years of massive budget deficits underlined the long road to economic normalcy in Latam’s largest economy.
“While aid programmes are arguably necessary, owing to the continued escalation of the COVID-19 crisis, the lack of progress toward extending the measures highlights how poorly the administration is dealing with the Congress,” analysts at TS Lombard wrote in a note.
“It also highlights the risk that the Congress will continue to push for more spending.” Despite the easing pressure, most emerging market currencies are still trading down for the year, as initial spikes in yields spurred large outflows from risk-exposed debt.