May 7, 2020 / 7:38 PM / 3 months ago

EMERGING MARKETS-Brazil's real sinks to new lows after rate cut; broader Latam rises

    * Real breaches 5.8 to the dollar
    * Most Latam stocks rise
    * Deutsche Bank sees some strength in EM

 (Adds details, updates prices)
    By Susan Mathew and Ambar Warrick
    May 7 (Reuters) - Brazil's real plumbed new lows on Thursday
after the country's central bank made a bigger-than-expected cut
to its key interest rate, while most other Latin American
currencies made healthy gains against the dollar.
    Risk assets cheered a surprise rise in China's April
exports, hoping that the world's second-largest economy may be
able to recover sooner than expected from a pandemic-induced
lockdown.
    The reading also pointed to some resilience in global
demand, aiding commodity prices. 
    Currencies of crude producers Mexico and Colombia
 rose around 1% as oil prices jumped, while rallying
copper prices lifted exporter Chile's peso.
    Most regional shares rose between 1% and 4%, while Brazil's
Bovespa fell on the prospect of strict lockdowns across
most of the country to curb the spread of the coronavirus.
    The country registered a record daily rise in the number of
coronavirus cases - 10,503 in 24 hours.
    Brazil's currency slumped 2.6% to around 5.85 as the
central bank cut rates by 75 basis points, 25 basis points more
than a consensus estimate, to a fresh record low of 3%. 
    The bank also previewed more action as it battles the
economic damage wrought by the novel coronavirus pandemic.

    "In our view, the authority seems bold in their dovish
flight plan in terms of new stimuli ahead," wrote Rabobank
strategists Mauricio Une and Gabriel Santos.
    "We now see one more rate cut of 75 basis points in the next
meeting in June, with the Selic ending the year at 2.25% p.a."
    The currency has lost about 31% so far this year making it
one of the worst performing in the emerging market space. 
    Political ructions in Brazil have made it an increasingly
less reliable investment destination, even in the risk-heavy
developing world space.
    Riskier assets in emerging markets
have taken a beating this year on worries about the dent to
global economic growth caused by the virus. But hope may be
around the corner, at least for some, say Deutsche Bank
analysts.
    "While developed markets have been hit especially hard, we
see many emerging markets faring better overall, at least in
terms of economic performance," they said, citing the success of
some Asian countries in containing the virus.
    Readings of the pandemic's economic damage continued to roll
in, with U.S. jobless claims spiking by more than 3 million over
the week.  
        
    Key Latin American stock indexes and currencies at 1910 GMT:
    
    Stock indexes             Latest       Daily % change
 MSCI Emerging Markets          898.28                  -0.05
                                        
 MSCI LatAm                    1574.56                  -1.56
                                        
 Brazil Bovespa               78726.42                  -0.43
                                        
 Mexico IPC                   36837.92                   -0.4
                                        
 Chile IPSA                    4021.74                   1.43
                                        
 Argentina MerVal             35946.88                  5.234
                                        
 Colombia COLCAP               1103.17                   1.17
                                        
                                                             
       Currencies             Latest       Daily % change
 Brazil real                    5.8557                  -2.57
                                        
 Mexico peso                   24.0600                   1.22
                                        
 Chile peso                      834.8                   0.53
                                        
 Colombia peso                 3913.96                   1.03
 Peru sol                       3.4018                   0.29
                                        
 Argentina peso                67.1800                  -0.12
 (interbank)                            
                                        
 
 (Reporting by Susan Mathew in Bengaluru; Editing by Andrea
Ricci and Chizu Nomiyama)
  
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