March 22, 2019 / 9:25 PM / 3 months ago

EMERGING MARKETS-Latam gets whacked as growth fears grip global markets

 (Recasts throughout, updates prices)
    By Susan Mathew
    March 22 (Reuters) - Latin American stocks and currencies
were hammered on Friday, caught up in a global selloff after
dismal economic data from across Europe and the United States
reignited fears of a slowdown in the global economy and signaled
the possibility of the world's largest economy sliding into
recession.
    An inversion of the U.S. Treasury yield curve after
weaker-than-expected manufacturing data suggested that the
economy could be headed for recession, worsening risk aversion
already sparked by similar data from Germany and other economies
in the European Union.
    MSCI's index of Latin American stocks slid
by 4.3 percent, while its regional currency index
 dropped 1.8 percent, both logging their biggest
one-day losses since May 2017. On the week, the stock index shed
close to 5 percent.
    The weak manufacturing readings led to the dollar
strengthening compared with emerging currencies as it aggravated
worries about a global slowdown, and weighed on emerging market
sentiment in general, said Inan Demir, senior emerging market
economist at Nomura in London. 
    Analysts also pointed to cautiousness amid uncertainty
around Brexit and U.S.-China trade tensions. 
    Mexican stocks fell 2.3 percent, while the peso
 eased 1.3 percent, with the currency being further hurt
by the likelihood of a rate cut by the central bank as data
showed Mexico's annual inflation slowed in the first half of
March.
    The country's Finance Minister Carlos Urzua saying the
finance ministry is exploring possibilities to reduce the costly
refinancing of ailing state oil company Pemex's debt this year,
including dipping into a budget stabilization fund, did little
to cheer the market.
    Brazil shares dropped 3.1 percent to extend losses
to a fourth session with all key sectors in the red, taking
weekly losses to 5.6 percent. The currency tumbled almost
3 percent on the day. 
    Brazilian markets were hit on Thursday by the arrest of
former president Michel Temer on graft charges as it threatened
to take official focus away from crucial fiscal reforms. An
Ibope poll earlier this week also showed plunging support for
the current government.
    Analysts at XP Investments wrote that while they remain
optimistic about the progress in passing reforms, they
"anticipate volatility, with a tough negotiation process ahead
for pension reform, and a series of risks that can increase
tension."
    In Argentina, stocks sank 3.7 percent, while the
peso slid 2 percent and lost more than 4 percent on the
week. Chile's peso hit a more than 10-week low. 
    Colombian stocks broke a nine-day winning streak to
post their biggest one-day drop in three months. The currency
 weakened 1.4 percent. Colombia's central bank on Friday
stood pat on rates as expected. 
    Nomura's Demir said that an over 5 percent dive in the
Turkish lira may also have spilled into weakness among
emerging markets currencies. The lira was on track for its
biggest daily fall since a currency crisis took hold in August.

       
    Key Latin American stock indexes and currencies at 2100 GMT:
      Stock indexes          Latest     Daily pct
                                         change
 MSCI Emerging Markets        1,059.63      -0.94
                                        
 MSCI LatAm                   2,712.96      -4.31
                                        
 Brazil Bovespa              93,735.15       -3.1
                                        
 Mexico IPC                  42,259.12      -2.29
                                        
 Chile IPSA                   5,209.98      -0.98
                                        
 Argentina MerVal            32,908.06      -3.74
                                        
 Colombia IGBC               13,069.14      -2.25
                                        
                                                 
        Currencies           Latest     Daily pct
                                         change
 Brazil real                    3.9066       -2.9
 Mexico peso                   19.0855     -1.256
 Chile peso                     679.51      -1.49
 Colombia peso                 3,129.3      -1.36
 Peru sol                        3.299      -0.36
 Argentina peso                 41.740      -2.04
 (interbank)                            
 

 (Reporting by Susan Mathew in Bengaluru, Karin Strohecker in
London and Laís Martins in Sao Paulo;)
  
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