MEXICO CITY (AFX) - Latin American stocks ended mostly weaker in tepid trading Monday as investors turned cautious ahead of Thursday's meeting of the U.S. Federal Reserve's policy-making body and Sunday's presidential election in Mexico.
Mexico City's IPC index of 35 most-traded issues closed down 0.3 percent, or 54.33 points, to 18,491.40 after trading flat most of the session on thin volume.
The decline followed four sessions of gains on the local market, which is expected to see more volatility as Sunday's elections approach. Conservative Felipe Calderon is running neck-and-neck with leftist Andres Manuel Lopez Obrador, according to opinion polls.
The peso closed weaker, ending at 11.4615, compared with Friday's 11.4215 close.
Brazil's stock prices also ended slightly lower in sluggish trade Monday as investors maintained a cautious posture ahead of the interest-rate meeting at the U.S. Federal Reserve.
The main Sao Paulo index ended 0.1 percent lower at 34,631 points. The Brazilian real closed slightly stronger Monday on sales of dollars to the market by exporters, finishing at 2.225 to the dollar, up slightly Friday's close of 2.230.
Most analysts expect the Federal Open Market Committee, the Fed's policy-making arm, will raise the base rate by 25 basis points. However, according to a research note by Brazilian bank Unibanco, 'markets are beginning to consider a small likelihood of a 50 basis point rise.'
Rising U.S. interest rates hurt emerging-market assets because investors tend to prefer safer U.S. Treasury bond investments. This week's FOMC meeting is also considered crucial because of a possible change in tone by the Fed's board.
'Markets will be looking for signs as to how much more tightening the Fed will be willing to impose on the U.S. economy,' said Unibanco.
Bucking the regional trend were Argentine stocks, which finished higher in thin trading Monday, as a slight improvement in international market sentiment spurred some exploratory buying of key stocks.
The benchmark Merval Index ended up 2.01 percent at 1,621.15 points.
'There was a little bit of money going after the most liquid stocks,' said Ruben Pascuali, an analyst at Mayoral Bursatil in Buenos Aires. He suggested that sophisticated buyers were buying up the liquid stocks that cash-flush Argentine pension funds will likely next week go after when midyear bonus payments boost their contributions and overall liquidity.
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