(Updates prices, adds news from Mexico and Argentina)
By Bruno Federowski
SAO PAULO, Feb 2 (Reuters) - Latin American markets retreated on Friday after data showing U.S. job growth surged in January and wages increased, lifting expectations of faster U.S. interest rate hikes, which could dampen demand for risky emerging market assets.
The robust employment report bolstered expectations of price pressures that could drive U.S. inflation back toward the official target. It underscored strong momentum in the economy, raising the possibility that the Federal Reserve could be a bit more aggressive in raising interest rates this year. The U.S. central bank has forecast three rate increases this year after raising borrowing costs three times in 2017.
Higher U.S. rates could lessen demand for risky assets, which typically offer higher yields. That perception drove widespread profit-taking on emerging markets, which had undergone a sharp rally in the first month of the year.
The currencies of Brazil , Mexico and Colombia fell between 0.13 percent and 1.59 percent.
Also curbing demand for Brazilian assets were concerns over an unpopular bill cutting social security spending, which investors see as key to fueling long-term economic growth.
"Local caution adds to risk aversion worldwide, bumping the dollar up against the Brazilian real," Spinelli brokerage trader Jos?(C) Amado said.
Along with Argentina and Colombia, Brazil's benchmark Bovespa stock index led the losses among Latin American stock markets, weighed down by blue-chips such as lender Ita?? Unibanco Holding SA and Banco Bradesco SA and miner Vale SA .
Shares in Argentine power company Central Puerto SA CEPU.BA fell as much as 24 percent on the Buenos Aires stock exchange on Friday after the company's U.S. initial public offering priced below expectations. In Mexico, the central bank is expected to raise interest rates next week to a nine-year high in order to contain worries that inflation may not cool as fast as expected amid concerns the country's peso could be battered again this year.
Banco de Mexico is expected to hike its key rate by 25 basis points to 7.50 percent, a level not seen since February 2009, according to 17 of 20 and analysts polled by Reuters. The move would follow a quarter-point hike in December. Key Latin American stock indexes and currencies at 2158 GMT:
Stock indexes Latestdaily % changeYTD % change
MSCI Emerging1230.83 -1.436.25Markets MSCI LatAm 3139.05 -2.73 10.99 Brazil Bovespa84041.34-1.7 10.00 Mexico IPC50395.83 -0.392.11 Chile IPSA 5825.99 -0.624.70 Chile IGPA29293.29 -0.584.69 Argentina MerVal32614.77 -5.858.48 Colombia IGBC 12145.72 -1.446.82 Venezuela IBC2827.56-11.29123.85 CurrenciesLatestdaily % changeYTD % change
Brazil real 3.2180 -0.132.96 Mexico peso18.5975 -1.345.92 Chile peso602.630.001.99 Colombia peso 2839 -1.595.04
Peru sol 3.2180.000.59 Argentina peso 19.4700 -0.46 -4.47(interbank) Argentina peso 19.870.30 -3.22(parallel) (Reporting by Bruno Federowski; Editing by Susan Thomas and Tom Brown)
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