January 29, 2020 / 7:26 PM / 2 months ago

EMERGING MARKETS-Latam markets muted amid coronavirus uncertainty; Mexico up on trade deal

    * Chilean central bank rate decision awaited 
    * Brazil's real down after surprise Dec deficit
    * China virus prompts widespread caution

 (Adds details, updates prices)
    By Ambar Warrick
    Jan 29 (Reuters) - Most Latin American assets edged lower on
Wednesday as the markets continued to assess the Chinese virus
epidemic, while Mexico's stocks and currency drew mild support
from the U.S. signing of a new North American trade agreement.  
    An increasing death toll from the Wuhan virus, as well as
comments that China's economic growth may drop to 5% or even
lower due to the virus, cast a pall over financial
markets.
    China, the world's second-largest economy, is a key export
destination for Latin American goods. Any economic disruptions
by the virus would dent demand in the country, and would likely
be reflected across the region. 
    "It is too early at this stage to make any reliable estimate
of the future trajectory of this virus – which is what markets
require to find more solid ground," Rabobank analysts wrote in a
note. 
    Mexico's peso strengthened slightly to the dollar
after U.S. President Donald Trump signed a new
U.S.-Mexico-Canada trade agreement, introducing tougher rules on
labor but leaving about $1.2 trillion in annual trade flows
between the countries largely unchanged.
    Mexican stocks were also higher, gaining for a second
straight session after fears over the Chinese virus' economic
impact had triggered a mass exodus from risk assets across the
globe.
    Brazil's real dropped after the government reported a
primary budget deficit for December, as opposed to expectations
of a surplus for the month.
    However, the overall budget shortfall for 2019, before
interest payments, was about 1.3% of the country's GDP, as
compared with a 1.7% deficit in 2018.
    Stocks in Latin America's largest economy were also
lower on the day.
    Brazilian central bank figures showed bank lending and the
financial health of borrowers ending 2019 on a positive note, as
default ratios and lending spreads fell against a backdrop of
strong credit growth.    
    The Chilean peso touched its weakest level to the
dollar in nearly two months, ahead of the Central Bank of
Chile's decision on interest rates, expected at 2100 GMT. 
    The bank is widely expected to stand pat on its rates while
the economy recovers from the impact of violent anti-government
protests, which erupted in October. The protests had caused the
peso to fall nearly 15%, prompting sustained intervention by the
central bank to support the currency.  
    Markets showed little reaction after the U.S. Federal
Reserve held rates steady at its Wednesday meeting, and gave no
new guidance about its measures to maintain short-term liquidity
in  bank funding markets.
    
    Key Latin American stock indexes and currencies at 1910 GMT
    
    Stock indexes             Latest      Daily % change
 MSCI Emerging Markets         1097.88               -0.35
                                        
 MSCI LatAm                    2841.58                0.17
                                        
 Brazil Bovespa              116216.53               -0.23
                                        
 Mexico IPC                   45143.84                0.95
                                        
 Chile IPSA                    4573.24                0.06
                                        
 Argentina MerVal             40569.42              -0.637
                                        
 Colombia COLCAP               1633.50                0.54
                                        
                                                          
       Currencies             Latest      Daily % change
 Brazil real                    4.2222               -0.68
                                        
 Mexico peso                   18.6857                0.16
                                        
 Chile peso                      791.5               -0.39
                                        
 Colombia peso                  3385.8               -0.04
 Peru sol                        3.344               -0.18
                                        
 Argentina peso                60.2300               -0.08
 (interbank)                            
                                        
 
    

 (Reporting by Ambar Warrick in Bengaluru
Editing by Marguerita Choy)
  
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