EMERGING MARKETS-Brazil's real slides 2% as policy uncertainty adds to Fed's dour outlook

    * Brazil's Senate overturns presidential veto on public
sector pay
    * Move could hit economy ministry's saving -analyst  
    * U.S. weekly jobless claims back above 1 million
    * Oil, copper, iron ore prices slide

    By Susan Mathew
    Aug 20 (Reuters) - Brazil's real and stocks led losses among
Latin American markets on Thursday as a rise in U.S. weekly
jobless claims back above the 1 million mark underscored the
U.S. Federal Reserve's dour economic outlook, exacerbating a
move out of risk assets.
     MSCI's index of Latam currencies fell 0.2%
as the real slid 2.1% to three-month lows, while Sao
Paulo's Bovespa stock index slumped 0.9%, putting an
index of the region's stocks on track for its
sharpest one-day drop in two months.
    Policy concerns also weighed in Brazil.  
    Brazil's Economy Minister Paulo Guedes called a Senate
decision on Wednesday to overturn a presidential veto blocking
public sector pay rises during the COVID-19 pandemic a
"disaster" and a "crime" against the people.
    If the Chamber (of Deputies) approves the Senate's decision,
"this could jeopardize the savings of 130 billion reais, which
the economy ministry had expected," said analysts at CM Capital
    Amid investor worries that Brazil may exceed its pending
cap, President Jair Bolsonaro said emergency payments to the
country's poor could be extended through the end of the year.
Guedes said Brazil's economy is recovering in the shape of a
Nike "swoosh".
    Investors fled to safe havens such as the dollar and gold
after the Fed said more policy easing may be needed to help the
economy out of a pandemic-induced slump. Data on Thursday showed
new claims for unemployment benefits rose above 1 million in the
latest week.
    Oil, iron ore and metal prices fell, pressuring assets in
commodity-heavy Latam.
    Surging number of COVID-19 cases in Latam also weighed but
some optimism came from Brazil's health ministry which said the
spread of the virus in the country could be about to slow.
    The Mexican peso lost 0.2% and Chile's currency
 slid about 0.4%, while Colombia's currency lost
almost 1%.
    Their stock markets lost between 0.1% and 1.2%, in line with
lackluster moves on Wall Street. 
    Elsewhere in the emerging market universe, Turkey's lira
 lost 0.7% against the dollar after the central bank held
its key rate steady as expected despite the lira hitting record
lows this week. 
    The bank will continue back-door liquidity measures, it
said, and raised forex and lira required reserve ratios for
commercial banks.
    Key Latin American stock indexes and currencies at 1430 GMT:
  Stock indexes           Latest   Daily %
 MSCI Emerging Markets    1078.72    -1.88
 MSCI LatAm               1932.79    -2.59
 Brazil Bovespa          99977.55    -0.87
 Mexico IPC              38558.66    -1.19
 Chile IPSA               3976.50    -0.56
 Argentina MerVal        47014.93   -0.962
 Colombia COLCAP          1160.82    -0.08
      Currencies          Latest   Daily %
 Brazil real               5.6470    -2.08
 Mexico peso              22.1897    -0.30
 Chile peso                 787.5    -0.46
 Colombia peso            3789.34    -0.90
 Peru sol                  3.5747    -0.36
 Argentina peso           73.5200    -0.05
 (Reporting by Susan Mathew in Bengaluru; Additional reporting
by Maria Carolina Marcello and Gabriel Ponte in Brasilia
Editing by Paul Simao)

Source: Read Full Article