LatAm assets advance as investors shift focus to cenbank decisions

By Utkarsh Hathi and Purvi Agarwal

Latin American assets gained on Monday, supported by a risk-on mood on Wall Street and signs that geopolitical risks remained contained.

MSCI's Latin American equities index <.MILA00000PUS> rose 0.39%, while the currency equivalent <.MILA00000CUS> rose 0.60%.

Investor sentiment toward regional assets remains tied to global risk appetite , with attention now turning to monetary policy decisions from several LatAm central banks this week.

Meanwhile, OPEC+ agreed to increase oil output starting in August and signs of increasing exports through the Strait of Hormuz weighed on oil prices.

"Latin America has seen the smallest import-price increase and historically has the weakest transmission from import prices to CPI," said analysts at Oxford Economics.

"In Latin America, subsidies, tax cuts, and price controls are also cushioning the inflation and consumption impact."

On Monday, Mexican equities BMV:ME rose 0.9%, while the peso FX_IDC:USDMXN edged 0.4% higher against the dollar.

Colombia's peso FX_IDC:USDCOP weakened 0.34%, while local equities BVC:ICAP fell 0.9%, largely dragged down by a 4.7% fall in oil firm Ecopetrol BVC:ECOPETROL.

Colombian assets had rallied into late June when right-wing outsider Abelardo De La Espriella won the presidential election on hopes of market-friendly reforms.

However, a smaller-than-expected victory margin raised concerns over the passage of reforms, causing a divergence between a rally in the currency and sharp losses in stocks.

De La Espriella's win cemented the narrative of a rightward shift in Latin America, which was soon followed by conservative Keiko Fujimori's victory in Peru.

Peruvian stocks (.MXNUAMPESCPGPE) gained nearly 1%, and the sol FX_IDC:USDPEN dipped 0.2%.

"We expect (the Monetary Policy Committee) to preserve a cautious tone on the inflation outlook while reaffirming its view that the supply shocks affecting the economy are transitory and now normalizing," Goldman Sachs analysts wrote.

Brazilian equities BMFBOVESPA:IBOV slid 1%. Investors have been closely scrutinizing the domestic political developments in recent months.

Senator Flavio Bolsonaro is urging Washington to delay a proposed 25% U.S. tariff on Brazilian goods until after the October elections in an attempt to distance himself from the levies blamed on his camp.

The right-wing challenger's popularity has taken a hit after a report linked him to a disgraced banker and his stepmother resigned from the women's wing of his party, hurting his dwindling chances of defeating current President Luiz Inacio Lula da Silva.

Key Latin American stock indexes and currencies at 19:20 GMT