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Mexico’s markets weaken as Pemex plan underwhelms

(Updates prices) By Sruthi Shankar July 16 (Reuters) – A resurgent dollar piled pressure on Latin American currencies on Tuesday, with the Mexican peso leading losses as investors were disappointed by a new business plan for debt-laden oil firm Pemex. The peso fell over 0.6% after Pemex reiterated the government would reduce taxes on the world’s most indebted oil company by some $7 billion over the next two years, injecting capital for a refinery and higher output. The much-awaited plan offered few new details, failing to excite investors who are worried about downgrades from credit rating agencies Moody’s and S&P following Fitch’s downgrade on its debt to junk in June. “We believe the amounts are underwhelming, the strategy doesn’t solve the main structural problems of the company,” Citi analyst Ernesto Revilla, wrote in a client note. “In our view, the probability of a downgrade to junk by Moody’s has gone higher.” Pemex Chief Executive Octavio Romero said a more detailed, 200-page version of the plan would be unveiled later on Tuesday. Mexico’s main stock index dropped about 0.4%, led by a 5% loss in broadcaster Televisa while financial stocks also dropped. Other currencies in the region weakened as the dollar firmed after a surprisingly strong U.S. retail sales numbers soothed jitters about the American economy and trimmed expectations the Federal Reserve may embark on a deep interest rate cut later this month. Emerging market assets have benefited this year from hopes that major central banks would embrace looser monetary policy as global growth slows. Brazil’s real fell 0.2%, while the Colombian and the Chilean pesos dropped 0.4%. The Argentine peso closed 0.43% lower, adding to steep losses from Monday. Data showed consumer prices rose 2.7% in June, marking the third straight month of deceleration amid a more stable foreign exchange market. Among stocks, Brazil’s Bovespa was little changed as gains in stock exchange operator B3 SA on positive brokerage recommendations were offset by losses in state-run oil firm Petrobras, hit by falling oil prices. Stock indices in Chile and Colombia moved higher between 0.2% and 0.6%, but Mexico’s IPC index fell marginally. Key Latin American stock indexes and currencies at 1943 GMT Stock indexes daily % Latest change MSCI Emerging Markets 1059.61 0.18 MSCI LatAm 2928.51 -0.45 Brazil Bovespa 103743.38 -0.06 Mexico IPC 42914.72 -0.35 Chile IPSA 5076.43 0.16 Argentina MerVal 41801.11 1.32 Colombia IGBC 13111.34 0.64 Currencies daily % change Latest Brazil real 3.7659 -0.29 Mexico peso 19.0805 -0.58 Chile peso 681.37 -0.41 Colombia peso 3198.7 -0.40 Peru sol 3.287 -0.12 Argentina peso 42.6700 -0.40 (interbank) (Reporting by Sruthi Shankar in Bengaluru Editing by Alistair Bell)

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