EMERGING MARKETS-Brazil’s real rise in choppy trading, other EM FX mixed on growth worries

(Updates prices) By Devik Jain Nov 21 (Reuters) – The Brazilian real jumped on Monday after President-elect Luiz Inacio Lula da Silva said fiscal responsibility was equally important as spending to improve the economy, while its regional peers were mixed on growth worries following COVID-19 flare-ups in China. The real rose 1.3% in volatile trading against the dollar, gaining for the second straight day. The currency and the stock index Bovespa have slumped 2.5% and 5.6%, respectively, this month as investors fretted about the state of Brazil’s public accounts after Lula’s incoming administration proposed exempting some 175 billion reais ($32.51 billion) from the spending cap on next year’s budget to pay for welfare programmes. However, the leader of Lula’s Workers Party said in the lower house on Friday that the transition team could include a new fiscal framework commitment in a proposed constitutional amendment. Among other Latin American currencies, Mexico’s peso fell 0.5% and Chile’s peso was up 0.1%, while Colombia’s peso climbed 0.8% even as the prices of their top exports, oil and copper, dipped on demand concerns from China. Officials across several Beijing districts urged residents of areas hit hardest by the coronavirus to stay home, as infections in China’s capital and nationwide ticked higher. With China’s COVID curbs already dragging on growth, this could further slow economic recovery. China’s yuan slipped 0.7%, while MSCI’s index of emerging market shares dropped 1.3% after a three-week winning streak. The safe-haven greenback rebounded 0.8% on Monday after a sharp fall in recent weeks on hopes of smaller interest rate hikes by the Federal Reserve. “Latin America as a region is likely to do better than some of the other EM regions because of where they are on monetary policy cycle,” said Rachel Ziemba, founder, Ziemba Insights. “(But) they are going to be challenged by the commodity cycle. It’s going to be a bit rocky and driven by global sentiment, and in particular where oil is concerned.” Latam assets rallied strongly in the first-half of 2022 because the Russian war on Ukraine led to a sharp rise in commodity prices. However, those gains petered out as prices dropped in the second half on global recession worries stoked by central banks’ aggressive interest rate hike campaigns to tame inflation. While emerging market central banks, especially countries like Brazil, started their monetary policy tightening ahead of the United States and developed countries in Europe, inflation has consistently stayed above their target expectation. Among stocks, power company Copel surged 21.9% after the Brazilian state of Parana sought to turn the state-run utility into a firm with dispersed ownership and no controlling shareholder. Meanwhile, Mexican President Andres Manuel Lopez Obrador said it was likely that a Latin American summit would be canceled after Peru’s Congress refused to allow President Pedro Castillo to travel to Mexico. Latin American stock indexes and currencies at 1944 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 930.54 -1.32 MSCI LatAm 2182.70 0.37 Brazil Bovespa 109538.98 0.61 Mexico IPC 51569.72 0.41 Chile IPSA 5312.14 2.22 Argentina MerVal 157253.60 1.285 Colombia COLCAP 1235.12 -3.71 Currencies Latest Daily % change Brazil real 5.3121 1.17 Mexico peso 19.5526 -0.60 Chile peso 941.1 -0.01 Colombia peso 4947 0.75 Peru sol 3.8302 -0.32 Argentina peso (interbank) 163.1700 -0.23 Argentina peso (parallel) 302 1.66 (Reporting by Devik Jain in Bengaluru; Editing by Alex Richardson and Grant McCool)