BRASILIA: Latin American stocks rose on Friday and were on track for their best day in over three weeks, helped by higher oil prices even as renewed tensions in the Middle East kept global risk appetite in check. MSCI’s Latin American equity index rose 2.1USD on Friday, set for its biggest one-day gain since June 17, while the currency index rose 0.4USD. Both were headed for weekly gains.
Oil markets were jolted this week as the US and Iran exchanged strikes, sending crude prices higher and providing a tailwind for a region that counts oil among its major exports. Limited exposure to AI names also cushioned the blow for regional assets as doubts about the durability of the AI rally resurfaced, sending AI-heavy bourses in South Korea and Taiwan down this week.
“The geo-economics are very positive for Latin America,” said Steven Schoenfeld, CEO of MarketVector Indexes.
Still, fresh strikes between the US and Iran in the Middle East have dented global risk appetite, and concerns about oil supply could reignite questions about global growth. US President Donald Trump said Washington had agreed to talks with Iran after Tehran asked to continue negotiations, but reiterated the ceasefire between the two nations was “over.” The International Energy Agency said that the recent escalation could disrupt its forecast of a significant oil market surplus next year.
“The re-escalation of hostilities has injected some volatility into markets, but geopolitics appears far from being the only focus for investors,” Barclays analysts said in a note.
“The Fed, fiscal challenges, prospective bond supply, and the AI and commodity cycles create a diverse set of drivers for EM assets.”
Currencies in LatAm appreciated against the dollar. Colombia’s peso strengthened 1.2USD to its highest level since January 2020. It was headed for its eighth consecutive week of gains, its longest winning streak since August. Local stocks inched 0.1USD higher. Meanwhile, Brazilian equities outperformed peers with a 2.8USD gain. Financial stocks provided a boost, with Banco Bradesco up 4.2USD and Itau Unibanco gaining 3.7USD.
Data showed Brazil’s inflation slowed in June, undershooting market forecasts, likely allowing the central bank to keep markets guessing on its next interest rate move amid tight financial conditions.
“That will give policymakers at the BCB more confidence to press ahead with another 25 bps cut… although a lot will hinge on the inflation and activity data due to be released before then,” said Kimberley Sperrfechter, senior EM economist at Capital Economics.