October 23, 2018 / 2:56 PM / 23 days ago

EMERGING MARKETS-Global sell-off takes toll on Latin America stocks, forex

    By Aaron Saldanha
    Oct 23 (Reuters) - Latin American stocks dropped on Tuesday,
led by a 1.6 percent slide in Brazilian equities, swept up in a
global sell-off sparked by concerns about Saudi Arabia's
diplomatic isolation, a brewing spat over Italy's finances and
fatigued U.S. corporate earnings. 
    MSCI's index of Latin American stocks fell
2.5 percent along with a 2.6 percent drop in the broader
emerging markets index, which was weighed down by
Chinese stocks. Latin American currencies were
0.9 percent weaker.
    "It's all really about the equity market right now. We're
seeing a risk-off environment shaping up," said Win Thin, global
head of emerging market currency strategy at Brown Brothers
Harriman.
    "Yen is outperforming and so are U.S. treasuries, gold and
Swiss franc. It's the classic kind of risk-off," Thin said.    
    Brazil's main equity index was hurt by losses in all
sectors. Iron ore miner Vale SA fell 3.8 percent.
    The real weakened for the second session in seven as
bullish momentum eroded ahead of Sunday's presidential run-off
election. Front-runner Jair Bolsonaro is expected to top
Fernando Haddad of the Workers' Party, polls show.
    "I've been telling clients, Brazil may outperform but in
asset terms it is going to be hard for the real to continue
strengthening when the rest of the EM is under pressure," said
Thin.    
    "There is a kind of pricing perfection. The markets are a
little too bulled up ... markets prefer Bolsonaro but he is by
no means a perfect candidate." 
    Mexican stocks traded down 1.4 percent. Their
Colombian peers dropped 1.3 percent, hitting a one-week
low.
    Mexico's peso weakened 0.2 percent, adding to losses
recorded on Monday when U.S. President Donald Trump threatened
to shut the U.S.-Mexico border in reaction to a U.S.-bound
migrant caravan from Central America. 
    Mexico's economy shrank 0.1 percent in August from July.
 
    Argentina's peso weakened 1.3 percent, the most among
Latin American currencies. Traders cited excess peso liquidity 
seeking safe-haven dollars.     
    Key Latin American stock indexes and currencies at 1414 GMT
    
 Stock indexes                              daily %     YTD %
                                Latest       change    change
 MSCI Emerging Markets             957.10     -2.62    -15.16
                                                     
 MSCI LatAm                       2655.79     -2.54     -3.65
                                                     
 Brazil Bovespa                  84209.02     -1.62     10.22
                                                     
 Mexico IPC                      46356.74     -1.29     -6.07
                                                     
 Chile IPSA                       5066.37      -1.1     -1.10
                                                     
 Argentina MerVal                28039.35     -1.85     -6.74
                                                     
 Colombia IGBC                   12337.66     -1.18      8.50
                                                     
                                                             
 Currencies                                 daily %     YTD %
                                             change    change
                                   Latest            
 Brazil real                       3.7198     -0.89    -10.93
                                                     
 Mexico peso                      19.4337     -0.13      1.37
                                                     
 Chile peso                         686.2     -0.64    -10.43
                                                     
 Colombia peso                       3111     -0.89     -4.15
 Peru sol                           3.338     -0.18     -3.03
                                                     
 Argentina peso (interbank)       36.8000     -0.87    -49.46
                                                     
 Argentina peso (parallel)          36.25      2.07    -46.95
                                                     
 

 (Reporting by Aaron Saldanha in Bengaluru; Editing by Jeffrey
Benkoe)
  
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