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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

By Sruthi Shankar

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

1.2%, tracking modest gains on Wall Street. The benchmark

touched its lowest since October 2023 on Monday.

Helping 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

they fear will be unfavorable for businesses.

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 0.5% after hitting a

seven-month low hit in the previous session.

Petrobras rose 2% even as the state-run oil giant

said it had agreed to join a government tax debt renegotiation

program that would result in an estimated 11.9 billion reais

($2.19 billion) hit to its second-quarter net income.

The Chilean peso steadied ahead of a monetary policy

decision later in the day. The Andean country's central bank is

expected to lower its benchmark interest rate by 25 basis points

(bps) to 5.75%, a poll showed.

Elsewhere, the Hungarian forint firmed against the

euro after the central bank cut its base rate by 25 bps to 7%,

as expected, opting for the smallest cut in its 14-month-old

easing cycle.

Deputy Governor Barnabas Virag said in a press briefing that

there is "limited room" for rate cuts from July.

Key Latin American stock indexes and currencies:

Latest Daily %

change

MSCI Emerging Markets 1082.20 0.74

MSCI LatAm 2175.34 1.2

Brazil Bovespa 119766.33 0.53

Mexico IPC 53109.99 1.36

Chile IPSA 6527.50 0.32

Argentina MerVal 1582860.23 0.031

Colombia COLCAP 1390.50 0.86

Currencies Latest Daily %

change

Brazil real 5.4041 0.32

Mexico peso 18.4210 0.47

Chile peso 935.5 -0.04

Colombia peso 4085.66 1.13

Peru sol 3.7756 0.17

Argentina peso (interbank) 905.5000 -0.22