August 9, 2018 / 9:06 PM / 4 months ago

EMERGING MARKETS-Trade war, domestic politics pressure LatAm assets

    SAO PAULO/MEXICO CITY, Aug 9 (Reuters) - Major Latin
American currencies fell against the dollar on Thursday as
global trade tensions strengthened the greenback and political
uncertainty in Brazil hit sentiment as Latin America's largest
economy heads into a presidential election.
    The dollar gained against most currencies as investors bet
that trade war posturing and a strong U.S. economy would
continue to aid the currency. Trade tensions are seen as
beneficial for the U.S. dollar as the United States is better
placed then emerging markets to deal with protectionism, and
tariffs may narrow the U.S. trade deficit.
    "You've seen idiosyncratic stories start to morph slowly
into a generalized EM selloff today. I don't necessarily see
this as the start of something broader, but yes, today what
seemed to be a few pockets of weakness has spread across the
board," said Ilya Gofshteyn, macro strategist at Standard
Chartered Bank in New York.
    Late on Wednesday, Chinese state media accused the United
States of having a "mobster mentality," while a key World Trade
Organization metric on Thursday indicated that global trade in
goods is likely to lose momentum in the third quarter.

    Brazil's real currency was especially hard hit, after two
polls showed right-wing populist Jair Bolsonaro tying with
market-friendly centrist Geraldo Alckmin in the key state of Sao
Paulo ahead of the October presidential election. Traders were
also spooked by a Supreme Court decision increasing some
government salaries by over 16 percent in 2019.
    "Apparently, the powers that be do not understand the
seriousness of Brazil's fiscal situation," said Alvaro Bandeira,
head economist at brokerage Home Broker ModalMais.
    Brazil's real fell 0.95 percent in trade, while the
Mexican pesoMXN=D2> was off 0.98 percent and the Chilean peso
 slipped a more modest 0.26 percent.
    In equities markets, the biggest major mover was Argentina's
benchmark Merval index, which rose 1.11 percent after an
unfolding corruption probe there hit the index hard in recent
sessions.
    The Argentine index had climbed 2.06 percent in mid-day
trade amid what traders called a technical correction, after the
index fell 8.71 percent Monday through Wednesday.
    
Key Latin American stock indexes and currencies at 1940 GMT: 
    
    
 Stock indexes                    Latest        Daily  YTD pct
                                                  pct   change
                                               change  
 MSCI Emerging Markets              1,076.82    -0.27     -6.8
 MSCI LatAm                         2,652.63    -1.88    -4.41
 Brazil Bovespa                    78,806.84    -0.44     3.15
 Mexico IPC                        49,240.51    -1.31    -0.23
 Argentina MerVal                  26,970.63     1.11   -10.29
 Colombia IGBC                     12,060.49    -1.05     6.07
 Venezuela IBC                    106,408.80     4.22   235.62
                                                              
 Currencies                           Latest    Daily  YTD pct
                                                  pct   change
                                               change  
 Brazil real                          3.8012    -0.95   -12.84
 Mexico peso                         18.6515    -0.98     5.62
                                                       
 Chile peso                            646.6    -0.26    -4.94
 Colombia peso                        2910.8    -0.07     2.45
 Peru sol                               3.27    -0.03    -1.01
 Argentina peso (interbank)          28.0800    -1.53   -33.76
                                                       
 Argentina peso (parallel)              27.9    -0.36   -31.08
                                                       
 


 (Reporting by Gram Slattery in Sao Paulo;
Additional reporting by Jorge Otaola in Buenos Aires, Tom Finn
in London and Rodrigo Campos in New York
Writing by Anthony Esposito
Editing by Alistair Bell and Phil Berlowitz)
  
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