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Latam stocks up 1.94%, FX up 1%

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US August nonfarm payrolls below expectations

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Colombia CPI due later in the day

By Pranav Kashyap and Twesha Dikshit

Sept 5 (Reuters) - Most Latin American currencies jumped on Friday after a weak non-farm payrolls report clipped the dollar, while local equities jumped as traders cemented bets that the U.S. Federal Reserve will cut interest rates.

A gauge tracking the region's currencies rose to a record high, while a similar gauge for stocks gained nearly 2%, hitting its highest in more than a year.

Mexican and Brazilian stocks hit record highs, while Chilean stocks were up 0.8%.

Data from the U.S. showed jobs growth weakened sharply, while the unemployment rate increased to 4.3%, confirming that labor market conditions were softening and strengthening the case for a Fed rate cut this month.

Traders now pencil in 70 basis points of easing by year-end, LSEG data showed.

The dollar dropped, buoying Latin American currencies, with Brazil's real leading gains in the region on the day, up 1%.

In Brazil, a 0.3% drop in producer prices and a fourth month of stalled factory output underscore how elevated borrowing costs are slowing the economy.

Separately, Brazil's central bank announced new measures to strengthen the security of the country's financial system in response to recent cyberattacks on financial institutions.

Meanwhile, Argentine President Javier Milei faces a key litmus test in weekend local elections ahead of October's midterms.

His austerity blitz - credited with cooling inflation and bolstering market confidence - has also slashed public spending, stoking voter fatigue and eroding support for his "chainsaw" agenda.

Argentine equities have lagged regional peers in 2025, while the peso lost more than 30% year-to-date despite macro stabilization, and October's legislative vote looms as the next hurdle for deeper reforms amid a thin congressional hand.

"You need Argentina to open up capital markets and to bring a solution to the effects controls," said Alejandro Cuadrado, managing director and global head of FX & LatAm strategy at BBVA.

"The equity and local fixed income market is still very restricted to the rest of the world. So that's the bigger step they need to take to see this inflow from outside."

The Colombian peso was poised to gain for the sixth straight week, its longest weekly run in over three years. On the day peso rose 0.6% ahead of CPI data due later in the day where expectations are for 0.2% rise in inflation.

A relatively light data calendar kept Latin American currencies rudderless this week, with the currency basket set for only modest gains as investors dissected U.S. labor prints.

Stocks, meanwhile, extended their winning streak to a fifth week - the longest since February 2025 - as rate-cut bets solidified. CME's FedWatch now shows a September cut fully baked in, with the odds of a jumbo move creeping higher.

Meanwhile in Central and Eastern Europe, Ukraine's sovereign dollar bond slid close to 2 cents amid fading hopes of an imminent potential ceasefire or peace deal taking place.

Key Latin American stock indexes and currencies:

Equities Latest Daily %

change

MSCI Emerging Markets 1278.84 1.37

MSCI LatAm 2451.31 1.94

Brazil Bovespa 143292.58 1.63

Mexico IPC 60327.5 0.77

Argentina Merval 1983432.8 -0.346

5

Chile IPSA 9250.8 0.82

Colombia COLCAP 1852.07 -0.09

Currencies Latest Daily %

change

Brazil real 5.3909 1.01

Mexico peso 18.6183 0.55

Chile peso 963.23 0.88

Colombia peso 3959.22 0.57

Peru sol 3.5128 0.35

Argentina peso (interbank) 1364 -0.07

Argentina peso (parallel) 1345 1.49