LatAm markets mixed as US-Iran tensions, Mexico data and Brazil poll take focus

Latin American markets were mixed on Monday as investors awaited details of threatened US sanctions on Iran and assessed their potential impact on emerging economies. Regional stocks rose 0.7%, while currencies were split, with the Mexican peso and Brazilian real slipping against the dollar.

US Treasury Secretary Scott Bessent is due to hold a press conference after pledging the "greatest financial offensive ever" against Iran and its trading partners. Tehran has threatened to halt Gulf oil exports if the "economic war" continues. Pakistan's army chief is visiting Tehran on a mediation mission, while Washington prepares tougher measures. China, Iran's largest oil customer, has been urged by Bessent to support US pressure.

In Mexico, the economy rebounded in the second quarter, posting its strongest growth since early 2022. Annual inflation accelerated to 3.26% in the first half of August from 3.10% a month earlier, though it remains within the central bank's target range. Analysts note Mexico's underperformance given its proximity to the US market and demographic advantages, but warn that uncertainty from US trade policy is a headwind.

Investors are also watching failed US-Canada trade talks after Washington imposed 50% tariffs on some Canadian goods on Saturday. The talks are separate from, but politically linked to, the 2026 review of the US-Mexico-Canada Agreement.

In Brazil, stocks rose 0.8% while the real slipped. A Nexus poll commissioned by BTG Pactual shows President Luiz Inacio Lula da Silva and Senator Flavio Bolsonaro in a technical tie in a potential runoff ahead of October's election, raising the prospect of election-related volatility. Shares in education company YDUQS jumped about 13% after it confirmed talks with Nasdaq-listed Afya over a potential combination.

Elsewhere, Moody's upgraded Pakistan's sovereign rating to B3 from Caa1, citing improved governance and reduced external vulnerability risks.