Equity Regains Losses, TARP Rebound Seen

After the rout, LatAm equity has recovered slightly, outperforming US stocks, but not as much as it overshot on the downside. Brazil’s Ibovespa rallied 4.59% to 48,142, off the day’s high at 48,658. It skidded as deep as 43,766 in the previous session, which saw the sharpest decline in more than a decade. The BRL meanwhile jumped 3% to BRL1.905/USD, after scraping 1.964/USD Monday. Other regional stocks and FX also experienced a relief rally, including Mexico, whose bolsa jumped almost 4% to close at the 24,889 peak. It scraped 23,789 Monday. The peso meanwhile flipped back to MXP10.94/USD, from MXP11 the previous day. The Dow Jones gained 4.7% after shedding almost 7% in the previous session amid a sharp uptick in volatility. “A version of the TARP still seems likely to pass the Congress eventually; there could be some amendments. The problem is timing,” says Citi. “These events are therefore likely to trigger a short-term bounce in Latin American equities from close to current levels,” it adds.