|Day's Range||43,094.03 - 43,559.61|
|52 Week Range||38,265.51 - 47,672.92|
Mexico's Senate aims to pass a first raft of bills to regulate fees for financial services by the end of October, said Ricardo Monreal, Senate leader of the ruling National Regeneration Movement (MORENA) party. Last November, shortly before President Andres Manuel Lopez Obrador took office, MORENA lawmakers presented a bill to limit bank fees, sparking an investor backlash that pummeled the peso , Mexico's S&P/BMV IPC stock index and banking shares.
The Mexican peso, vulnerable to trade risks due to its reliance on U.S. economy, jumped 0.8%, while the Chilean and the Colombian pesos rallied 1%, getting an extra boost from a rally in metal and oil prices. U.S. Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He, ended a second day of talks in Washington on Friday and Bloomberg News reported the two sides had reached a partial agreement that would lay the groundwork for a broader deal. The surge in risk appetite and a rally in the pound on rising hopes of a Brexit deal pressured the dollar.
The Mexican peso, vulnerable to trade risks due to its reliance on U.S. economy, jumped 0.7% to 19.31 per dollar, while the Chilean and the Colombian pesos rallied about 0.8%, getting extra boost from a rally in metal and oil prices. The rally came as U.S. President Donald Trump said U.S.-China trade talks were going well as the second day of top-level negotiations got under way. Investors are hoping the two sides will agree to a deal that could avert further retaliatory measures, while expectations of a last-minute Brexit deal between the European Union and Britain as well as approval of a North American trade deal all added to the optimism.
MSCI's index of emerging market stocks rose 0.5% after three days of losses, with Mexican shares surging 1% and Brazil's Bovespa up 0.6%, after U.S. President Donald Trump confirmed he would meet Chinese Vice Premier Liu He on Friday for further trade talks. Washington has threatened to impose further tariffs on $250 billion worth of Chinese imports on Oct. 15. "It needs to be seen if this initiative allows China and the U.S. to reach an agreement allowing a postponement of further tariffs or even a reduction of already implemented tariffs," Morgan Stanley analysts wrote in a note.
Brazil's Bovespa jumped 0.8%, while an index of emerging market stocks rose 0.5% after U.S. President Donald Trump confirmed he would meet Chinese Vice Premier Liu He on Friday for further trade talks. Washington has threatened further tariffs on $250 billion worth of Chinese goods on Oct. 15. "It needs to be seen if this initiative allows China and the U.S. to reach an agreement allowing a postponement of further tariffs or even a reduction of already implemented tariffs," Morgan Stanley analysts wrote in a note.
MSCI's index of regional shares rose 0.8%, with shares in Colombia also up 0.2%, while Mexican shares were marginally higher. Reports said China was still open to agreeing to a partial trade deal with the United States, and that Beijing was offering to increase its annual purchases of U.S. agricultural products. "Even if a partial deal is reached later this week, this will not change our view that the trade talks will eventually break down as China appears unwilling to meet the U.S. core demands," analysts at Capital Economics wrote in a note.
Latin American currencies edged lower on Monday after a three day run of increases, as the dollar gained favor amid skepticism over the outcome of the U.S.-China trade talks this week. MSCI's index of Latin American currencies was down 0.13% after rising 1.9% last week, while its equities counterpart edged down 0.3%, on course to erase all of last week's gains. Bloomberg reported over the weekend that Chinese officials were reluctant to agree to U.S. President Donald Trump's broad trade deal, denting sentiment ahead of a round of talks between the two sides on Oct. 10-11.
Recent sets of disappointing data from major economies through the week indicated that the manufacturing sector globally is in a synchronized slowdown, partly caused by the U.S.-China trade war, making investors weary of riskier bets. "The odds of a cut may have gone down but they are still quite high," said Win Thin, global head of emerging market currency strategy at Brown Brothers Harriman. "We have some more data points to look at next week including inflation numbers which should give a much clearer picture on what the Fed is likely to do." Most currencies in the region eyed weekly gains led by Brazil's real, on course to gain over 2% for the week, with additional impetus coming from optimism regarding the final stages of approval for a landmark pension reform bill.
Shares in Mexico lost more than 1.6%, while those in Brazil sank nearly 3%, both being on course to post their worst session in 1-1/2 months. Mexico's economy had barely escaped recession in the first half of the year, and deteriorating economic indicators point to sustained weakness despite the central bank's assurances of a slight economic recovery for the rest of 2019. "We see downside risk to the consensus earnings growth expectations (in Mexico) in the light of deteriorating GDP growth dynamics," wrote analysts at UBS in a note pointing also to uncertainty over the ratification of the United States-Mexico-Canada trade deal.
Regional currencies lost between 0.06% and 0.6%, with the Mexican peso slipping to its lowest in nearly one month, while Colombia's peso touched an all-time low. U.S. manufacturing activity tumbled to a more than 10-year low in September as lingering trade tensions weighed on exports, data showed, stoking fears of slowing growth in the world's largest economy.
Mexico's main stock index dipped 0.2%. The country's central bank cut the benchmark interest rate by 25 basis points for a second time this year, to 7.75%. "It's bit on the dovish side, which means there are more cuts ahead, which is reasonable," said Win Thin, global head of emerging market currency strategy at Brown Brothers Harriman.
MSCI's index of Latin American stocks rose 0.7%, in line with global moves in equities. Mexico's peso fell 0.2% to underperform its regional peers ahead of Banxico's central bank monetary policy meeting on Thursday where officials are expected to cut interest rates by 25 basis points. Further, data showed economic activity fell slightly in July compared to the previous month in Latin America's second-largest economy reviving fears that the economy may approach a recession after stagnating between April and June.
With the U.S. dollar broadly strengthening after the release of the Fed's policy statement, the Brazilian real led losses among the regional currencies with a 0.7% decline ahead of a rate decision from Brazil's central bank. New projections also showed policymakers at the median expected rates to stay within the new range through 2020, driving investors to cut bets on further U.S. rate cuts.
MSCI's index of Latin American currencies fell 0.8% with Chile's peso raking up the biggest losses. Focus was also on Brazil's central bank meeting this week when officials are widely expected to cut record-low rates by 50 basis points in order to shore up Latin America's largest economy. "Low inflation, subdued activity and continued fiscal consolidation progress bode well for a 50bp policy rate cut this week," said Gustavo Rangel, chief economist, Latam at ING in a note.
Oil prices surged nearly 20% at one point on Monday after the attack in Saudi Arabia, the world's biggest oil exporter, halved the kingdom's production. Trump also said the United States was "locked and loaded" for a potential response to the strikes, and that Iran appeared responsible, however, raising tensions. While currencies of some oil-exporters benefit from the steep rise in oil prices, concerns that an oil supply shock and geopolitical tensions would damage an already fragile global economy sapped investor demand for riskier assets.