LatAm markets lift on soft dollar, Mexico CPI in focus
A softer dollar and crude above $84 set a constructive tone for Latin American assets, but the session hinges on Mexican inflation data that will test regional rate-cut expectations.
Latin American equities are poised to open higher on Wednesday as a weaker US dollar and Brent crude above $84 a barrel provide a supportive backdrop across the region's major exchanges.
The greenback is retreating after US headline CPI cooled to 3.5% year-on-year in June from 4.2% in May, pushing the 10-year Treasury yield down to roughly 4.46%. This is eroding the yield advantage that has pressured emerging-market currencies for two years. With the S&P 500 closing up 0.89% at 7,509 and Asian stocks advancing, the macro environment is clearing the way for regional risk assets.
Mexico presents the session’s primary event risk. The national statistics institute will release mid-month July inflation figures at midday, with economists forecasting core CPI at 3.96% and headline at 3.13%. A benign print would reinforce expectations that the central bank has room to hold or cut rates, likely lifting the IPC index and the peso, which sat flat at 17.41 per dollar overnight. An upside surprise would threaten that disinflation narrative.
Brazil's market is splitting along structural lines despite the Ibovespa holding flat at 173,326 for a fifth consecutive session. The real, recently brushing a two-year high of 4.98 per dollar, continues to attract foreign capital to Brazil's 14.25% Selic rate. However, that elevated rate is punishing interest-sensitive domestic stocks like hospital operator Rede D'Or and drugmaker Hypera, which fell 4.3% and 5.5% respectively on Tuesday.
Conversely, commodity and banking names are thriving. Petrobras led B3 turnover at R$1.6 billion on the back of firm oil, while Banco do Brasil gained 3.5%. Technicians are watching for a potential test of the 166,000 floor if the index extends its losing streak.
Outside the traditional heavyweights, Argentina's Merval added 1.81% in the previous session as energy names rallied, with retail sales and consumer confidence data due Wednesday morning. In Colombia, the peso strengthened to 3,256 per dollar as the COLCAP eyes a 2,320 post-election ceiling. Both markets are drawing capital, signaling that the regional rally has broadened well beyond Brazil and Mexico.
