May 4, 2020 / 2:34 PM / a month ago

EMERGING MARKETS-Latam FX, stocks decline on somber data, U.S.-China tensions

    By Susan Mathew
    May 4 (Reuters) - Brazil's real fell sharply on Monday,
leading declines across most Latin American currencies, as a
series of dismal manufacturing activity numbers and rising
tensions between the United States and China dented risk
    MSCI's index of Latam currencies fell 0.2%.
Its stocks counterpart slid 2.8%, with Chile's
main index dropping 2.3% and Mexico's slipping
nearly 2%. 
    Factory activity was ravaged across the world in April,
business surveys showed, and the outlook looked bleak as
government lockdowns to contain the new coronavirus pandemic
froze global production and slashed demand.

    In Brazil, data showed manufacturing activity contracted at
its fastest pace on record last month.
    The real weakened 2.3%, while stocks in Sao Paulo
 fell 2.8%. Airline Gol Linhas Aereas Inteligentes
 led declines after it posted a loss of 2.3 billion
reais ($419 million) in the first quarter, almost entirely due
to the depreciation of the Brazilian currency.
    The real has lost 28% so far this year, almost
steadily hitting new lows, making it one of the worst performing
emerging market currencies. Stymied risk appetite due to worries
over the pandemic and a related slump in commodity prices were
exacerbated by political instability rocking the flailing
Brazilian economy. 
    Risk assets had broadly gained last month on plans to ease
lockdowns and hopes for a treatment for the virus, but began May
on the back foot as Beijing and Washington sparred over the
origin of the virus.
    U.S. Secretary of State Mike Pompeo said on Sunday there was
"a significant amount of evidence" that the novel coronavirus
emerged from a laboratory in the central Chinese city of Wuhan,
while an editorial in China's Global Times said he was
"bluffing" and called on the United States to present its
    "The prospect of a renewed U.S.-Chinese trade conflict is
likely to generally support USD," said Commerzbank analysts,
adding pressure on emerging market currencies.
    Caution also prevailed as investors kept an eye on the
number of coronavirus cases as economies gradually reopened.
    "If rising COVID-19 curves reemerge and economies are shut
down again, the damage to the stock market's psyche will be
dramatic," said Marc Chaikin, founder of quantitative investment
research firm Chaikin Analytics.
    Declining oil prices pressured crude producer Colombia's
peso, while the world's largest producer of copper,
Chile, saw its currency set for its biggest percentage
loss in two weeks as the price of the metal sank.
    Mexico's peso, meanwhile, rose 1% after marking its
third straight month of losses in April. 
    Key Latin American stock indexes and currencies at 1415 GMT:
  Stock indexes           Latest   Daily %
 MSCI Emerging Markets     888.87    -3.04
 MSCI LatAm               1592.86    -2.83
 Brazil Bovespa          78255.79    -2.79
 Mexico IPC              35773.44    -1.91
 Chile IPSA               3885.80    -2.31
 Argentina MerVal               -        -
 Colombia COLCAP          1120.07    -1.92
      Currencies          Latest   Daily %
 Brazil real               5.5649    -2.31
 Mexico peso              24.3280     0.99
 Chile peso                 839.2    -0.48
 Colombia peso            3990.36    -0.97
 Peru sol                   3.372     0.00
 Argentina peso           66.9200    -0.12
 (Reporting by Susan Mathew in Bengaluru
Editing by Paul Simao)
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