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U.S. data eases rate fears

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Brazil rate decision on Wed

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Chile central bank seen cutting rates

(Updated at 3:00 p.m. ET/1900 GMT)

By Sruthi Shankar and Shristi Achar A

June 18 (Reuters) - A gauge of Latin American stocks

rebounded from eight-month lows on Tuesday and currencies

stabilized as softer-than-expected U.S. retail sales data

supported expectations of interest rate cuts from the Federal

Reserve.

The MSCI's index of Latam equities jumped

1%, tracking modest gains on Wall Street. The benchmark touched

its lowest since October 2023 on Monday.

Cushioning the region's currencies on Tuesday, the dollar

eased after data showed U.S. retail sales barely rose in May and

numbers for the prior month were revised significantly lower,

suggesting the Fed could start cutting rates soon.

"U.S. economy growth downshifted in the first half of 2024,

putting more pressure on businesses to discount and keep

products moving off of their shelves. That will help reduce

consumer goods inflation in the second half of the year," said

Bill Adams, chief economist for Comerica Bank.

"The soft retail sales report adds to confidence that the

Fed will begin to cut interest rates in a few months."

Developing world markets have come under pressure in recent

weeks on concerns about U.S. rates staying elevated and

political shifts across world economies driving reforms, which

could be unfavorable for businesses.

The Chilean peso edged 0.1% lower on caution ahead of

a decision by the Andean country's central bank later in the

day. It is expected to lower its benchmark rate by 25 basis

points (bps) to 5.75%, a poll showed.

"The communique reiterated that further cuts remain on the

table, but the size would be data dependent, as usual,"

strategists at Citigroup said in a note.

"We hold our call for a 50bp cut in the June meeting,

followed by a downshift in the pace of cuts."

The Mexican peso added 0.5% in a rebound from

its fall since elections early in the month.

Brazilian President Luiz Inacio Lula da Silva criticized the

central bank saying its chief, Roberto Campos Neto, was harming

Latin America's largest economy, while signaling he will appoint

a substitute who is not swayed by market jitters.

The central bank in its meetings on Tuesday and Wednesday is

widely expected to pause its easing cycle.

Brazil's Bovespa edged up 0.4% a day after hitting a

seven-month low.

Petrobras rose 3.1% even as the state-run oil

giant said it had agreed to join a government tax debt

renegotiation program that would reduce its second-quarter net

income by an estimated 11.9 billion reais ($2.19 billion).

Key Latin American stock indexes and currencies:

Latest Daily %

change

MSCI Emerging Markets 1082.37 0.76

MSCI LatAm 2169.90 0.95

Brazil Bovespa 119661.16 0.44

Mexico IPC 53250.75 1.63

Chile IPSA 6543.81 0.57

Argentina MerVal 1561455.61 -1.322

Colombia COLCAP 1386.86 0.6

Currencies Latest Daily %

change

Brazil real 5.4266 -0.09

Mexico peso 18.4050 0.56

Chile peso 936.2 -0.12

Colombia peso 4148.5 -0.40

Peru sol 3.8029 -0.55

Argentina peso (interbank) 903.5000 0.00