Latin American markets advance as weak US jobs report weighs on dollar

By Utkarsh Hathi and Ragini Mathur

Latin American stocks and currencies rose broadly on Thursday, as softer-than-expected U.S. jobs data weakened the dollar and eased pressure on risk-sensitive emerging-market assets, while investors tracked regional political and trade developments.

MSCI's Latin American currency index (.MILA00000CUS) edged 0.1% higher. Its regional stocks gauge (.MILA00000PUS) gained 0.3%, rebounding after three straight sessions of losses.

U.S. job growth slowed more than expected in June, with payroll gains for the previous two months revised lower, pointing to a cooling labor market. The data led markets to pare expectations for a near-term Federal Reserve interest rate hike.

The dollar index TVC:DXY fell 0.5% to a two-week low after posting its strongest monthly performance in about a year in the previous month, offering relief to developing-world assets.

"If the dollar is losing ground and the Fed is less likely to hike again, that creates a much better backdrop for emerging-market currencies," said Juan Perez, director of trading at Monex USA.

Perez said optimism around recent elections in Latin America was also supporting sentiment.

Peru and Colombia became the latest countries in the region to shift rightward, with assets rallying last month on hopes that more market-friendly governments will take power.

Colombia's peso FX_IDC:USDCOP and Peru's sol FX_IDC:USDPEN rose 0.2% and 0.4%, respectively. Peru's main equity index (.MXNUAMPESCPGPE) and Colombia's COLCAP index BVC:ICAP added 0.3% each.

Brazil's real FX_IDC:USDBRL inched 0.1% lower, while the Bovespa stock index BMFBOVESPA:IBOV rose 0.4%.

In Brazil, a public feud with his stepmother, Michelle Bolsonaro, has cost Senator Flavio Bolsonaro a key ally among conservative and evangelical women, after she resigned from the Liberal Party's women's wing.

The split could worsen Bolsonaro's already weak standing with female voters as he seeks to oust President Luiz Inacio Lula da Silva from power. A BTG Pactual/Nexus poll released on Monday showed Lula leading Bolsonaro among women by 18 percentage points. Among all voters, Lula would win reelection with 49% support against Bolsonaro's 43%, the poll showed.

Argentina's Merval index BCBA:IMV climbed 0.9%.

The country faces a looming 2027 foreign currency debt wall of more than $32 billion, including interest. The repayments are set to coincide with President Javier Milei's expected re-election bid next year, making them a major test of whether his reforms can keep investor confidence intact.

Mexico's main stock index BMV:ME fell 0.3%, weighed down by a 3% fall in Walmex BMV:WALMEX, while the peso FX_IDC:USDMXN strengthened 0.4%.

Mexican assets were in focus after the Trump administration on Wednesday declined to extend the U.S.-Mexico-Canada Agreement, triggering a 10-year countdown toward the trade pact's expiration as Washington seeks changes aimed at reshoring manufacturing jobs.

"The dollar-peso pair will be very sensitive to how the USMCA renegotiation develops, especially given how important North American trade is for Mexico," Perez said.

Key Latin American stock indexes and currencies: