Latin American Markets Mixed as Investors Await US Inflation Data

Latin American financial markets ended Monday's session on a mixed note, as investors turned their attention to upcoming US inflation figures for clues on the Federal Reserve's next policy move. Persistent uncertainty in the Middle East also kept oil prices elevated, adding to the cautious mood.

The MSCI index tracking Latin American equities slipped 0.23%, marking a potential seventh consecutive session of losses, while the corresponding currencies gauge edged 0.21% lower.

Mexican stocks were among the region's biggest laggards, falling 0.59%, with the peso dipping 0.1%. The decline came after the European Union imposed tariffs on terephthalic acid, a raw material used in PET plastic production, affecting imports from Mexico and South Korea.

In a notable turnaround, Colombian equities rebounded from early losses triggered by a major earthquake that killed over 100 people and caused widespread damage. The COLCAP index rose 0.68%, and the peso strengthened 0.6% against the dollar, making it one of the region's top currency performers. Several dollar-denominated bonds, however, traded lower.

The earthquake strikes at a delicate moment for Colombia, which is transitioning under new right-wing President Abelardo De La Espriella. Sworn in on Friday, De La Espriella has pledged to combat drug trafficking and implement austerity measures to restore economic confidence. The US State Department has announced plans to provide $1 billion in security assistance to his government.

Policy experts at the Atlantic Council noted this marks a sharp break from the turbulent relationship with outgoing President Gustavo Petro, and could expand opportunities for US business and boost Colombian production.

Elsewhere, Brazil's Bovespa index declined 0.1%, and the real fell 0.6%. Argentina's equities led regional gains, rising 1.1%.

The muted moves in Latin America contrasted with Asian markets, where equities rose despite higher oil prices, as investors seized on a weak US jobs report from last week. The soft payrolls data has lowered expectations of a Federal Reserve rate hike, boosting risk appetite. Analysts at Ebury suggested that a significant upside surprise would be needed to tip the balance toward a September hike.

Oil prices rose after Tehran reiterated it would not reopen the Strait of Hormuz until certain demands were met by Washington, with President Donald Trump demanding compensation in response.