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Stocks, currencies set to snap multi-day rallies

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Powell tempers December rate cut hopes

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Wells Fargo Investment Institute upgrades EM equities

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Mexico finance ministry hikes 2025 inflation forecasts

(Updates with afternoon trading)

By Niket Nishant and Purvi Agarwal

Oct 30 (Reuters) - Latin American assets buckled under a

global risk-off sentiment on Thursday as traders parsed hawkish

signals from Federal Reserve Chair Jerome Powell and weighed the

outcome of the highly anticipated Trump-Xi meeting.

MSCI's index tracking regional stocks was

set to snap a three-day winning streak, while an equivalent

currencies gauge was poised to end a five-day

rally. They were down 0.8% and 0.6%, respectively.

Without major fresh catalysts in the region, investors took

cues from global developments. Sentiment was cooled by Powell's

warning on Wednesday that another rate cut in December may not

be on the table.

The outcome of the meeting between U.S. President Donald

Trump and his Chinese counterpart Xi Jinping also underwhelmed

investors as a deal, focused on trimming U.S. tariffs on China

in exchange for Beijing cracking down on illicit fentanyl trade,

resuming U.S. soybean purchases and keeping rare earth exports

flowing, fell short of broader expectations.

"The deal is not "comprehensive", but largely re-establishes

the status quo from the early summer, with the baseline

"reciprocal" tariff of 10%, and the Section 232 other tariffs

still applying," said Thierry Wizman, global FX and rates

strategist at Macquarie Group.

Emerging markets such as Latin America are highly sensitive

to U.S.-China trade ties, as robust relations tend to lift

global growth prospects and bolster risk sentiment, key for

external capital flows that buoy the region.

Powell's remarks and the U.S.-China deal lifted the dollar

index, up 0.4%, to its highest level in more than two

months.

RALLY OUT OF STEAM, LONG-TERM CASE INTACT

In Mexico, equities slipped 0.6% and the peso

dropped 0.3%, hitting its lowest in more than two weeks.

Preliminary estimates showed that the country's economy

contracted 0.3% in the third quarter from the previous

three-month period, in line with forecasts from economists

surveyed by Reuters.

Mexico's finance ministry raised its inflation estimate for

2025-end, even as it predicted that the economy would likely

improve in the last three months of the year.

Colombian stocks, which have surged 2.2% this week

and shrugged off increasing tensions between President Gustavo

Petro and Washington, also dipped 0.2%. They were set to snap a

six-session winning streak, their longest since August.

Argentina's Merval stock index slid 0.8%, paring

gains for the week. The peso was down 0.1%, after

gaining on Wednesday.

Chile's stocks soared 1.1%.

Brazil's Bovespa inched up 0.2%, extending a

six-session rally. The real, however, weakened 0.4%

against the dollar.

Still, long-term drivers for the emerging market universe

remained intact.

Analysts at Wells Fargo Investment Institute upgraded

emerging market equities to "neutral" from "unfavorable", citing

attractive valuations, especially for investors looking for AI

exposure outside the U.S.

"There are some big elections coming up over the next year

and a half. And there is a real possibility that the countries

may turn more pro-business," said Thea Jamison, founder of

investment management firm CHANGE Global.

Elsewhere, Mozambique's sole international bond

fell 2 cents on the dollar after ExxonMobil ( XOM )

executives abruptly canceled a media appearance with the

country's president the previous day.

Key Latin American stock indexes and currencies:

Latin American market

prices from Reuters

Equities Latest Daily %

change

MSCI Emerging Markets 1411.17 -0.37

MSCI LatAm 2569.98 -0.76

Brazil Bovespa 148877.27 0.16

Mexico IPC 62997.17 -0.56

Chile IPSA 9429.11 1.1

Argentina Merval 2780359.1 -0.77

1

Colombia COLCAP 1988.99 -0.24

Currencies Latest Daily %

change

Brazil real 5.3821 -0.4

Mexico peso 18.5429 -0.33

Chile peso 942.07 -0.16

Colombia peso 3857.51 0.44

Peru sol 3.3804 0.27

Argentina peso (interbank) 1438 -0.14

Argentina peso (parallel) 1435 0.35