EMERGING MARKETS-Chile’s peso hits 8-month low, lags Latam FX ahead of rate decision

* Chilean cbank set to cut rate by 75 bps * China’s August services activity slows – Caixin PMI * Brazil industrial output falls more than expected in July * Latam FX, stocks down over 1% each (Updated at 4:04 pm ET/ 2004 GMT) By Shashwat Chauhan and Ankika Biswas Sept 5 (Reuters) – Chile’s peso led a slide among most major Latin American currencies on Tuesday ahead of a likely interest rate cut by its central bank later in the day, while other units fell against a strong dollar amid concerns over China’s economic outlook. Chile’s peso fell 1.7% to its lowest level in more than eight months. Traders braced for a likely 75-basis-point rate cut to 9.50% later in the day, as per a recent central bank poll, after the Andean country’s central bank kicked off a policy easing cycle in Latin America in July. “When we look at the carry implications of this cut, its a substantial one,” said Matheus Zani, head of FX risk management at Deaglo. “It leads the currency to be less appealing to international investors to carry out these carry transactions.” A carry trade is a trading strategy that involves borrowing at a low-interest rate and investing in an asset that provides a higher rate of return. The latest data revealed China’s services activity expanded at the slowest pace in eight months in August, in another sign of persistent weak demand in the world’s second largest economy. China is a top consumer of metals and oil. The MSCI Latam currencies fell 1.3% hitting a two-week low as investors fled to the safe haven dollar. Iron ore producer Brazil’s real eased 0.7%, touching a two-week low as advancing iron ore prices took a breather. Data showed a steeper-than-expected slip in Brazil’s industrial production in July, providing an initial sign the sector may cap economic growth in third quarter. A separate reading showed Brazil’s auto industry production jumped 24% in August from the previous month. “From the domestic front, the industrial production and vehicle output (data) were negative news for the market,” added Deaglo’s Zani. A Brazilian central bank official said that the country’s second-quarter economic growth exceeded expectations, but did not fundamentally alter the prevailing outlook of an economic slowdown ahead. Oil producer Mexico’s peso also lost 1.4%, in line with their local peers, despite crude oil prices spiking over 1%. An opinion poll showed former Mexico City Mayor Claudia Sheinbaum held a comfortable advantage in the race to be the leftist ruling party’s 2024 presidential nominee. Colombia’s peso too, fell 0.8% against the dollar, its first fall in four sessions. Peru’s sol eased 0.1% against the dollar. MSCI’s index for EM stocks shed 1.6%, hitting a two week low. Brazil’s Bovespa stock exchange fell 0.2% in afternoon trade. Meanwhile, economies in Latin America and the Caribbean are expected to post a combined growth of 1.5% in 2024, the United Nations’ economic commission for the region (ECLAC) said. Key Latin American stock indexes and currencies at 2004 GMT/ 4:04 pm ET: Stock indexes Latest Daily % change MSCI Emerging Markets 985.47 -1.01 MSCI LatAm 2341.90 -1.61 Brazil Bovespa 117532.85 -0.21 Mexico IPC 52926.74 -0.2 Chile IPSA 5927.93 -1.04 Argentina MerVal 598287.53 -5.52 Colombia COLCAP 1051.18 -2.45 Currencies Latest Daily % change Brazil real 4.9740 0.01 Mexico peso 17.4239 -1.47 Chile peso 873.1 -1.63 Colombia peso 4083.5 -0.81 Peru sol 3.6838 -0.10 Argentina peso 349.9500 0.03 (interbank) Argentina peso 720 1.39 (parallel) (Reporting by Ankika Biswas and Shashwat Chauhan in Bengaluru; editing by Timothy Gardner)