June 14, 2019 / 8:05 PM / 3 months ago

EMERGING MARKETS-Latam stocks follow Wall Street lower, Brazil's real weakens

 (Updates prices, adds analyst comment)
    By Sruthi Shankar
    June 14 (Reuters) - Latin American stocks fell nearly 2% on
Friday, mirroring weakness on Wall Street, while the Brazilian
real dropped as optimism around the proposed overhaul of the
country's pension system faded. 
    The real fell 1% to 3.89 per dollar after Brazil's
Economy Minister Paulo Guedes expressed his disappointment with
a congressional committee's report on pension reform, saying it
made more changes to the government's original proposals than he
had expected.
    The currency was on track to give back all of its gains from
Thursday when the report was released. The report showed the
overhaul would help generate savings of 913.4 billion reais
($237 billion) over the next decade.
    In addition, a central bank indicator showed economic
activity unexpectedly fell in April, marking the longest stretch
of declining activity since the last recession in 2016.

    "It's (Guedes' comments) making investors nervous and 
leading to some weakness in the real," said Alejo Czerwonko,
emerging markets strategist at UBS Global Wealth Management.
    "This should be interpreted as a part of the ebbs and flows
in the approval process and ultimately doesn't alter the
baseline scenario that a reform will be approved this year."
    Broad gains for the dollar after encouraging U.S. retail
sales data also knocked developing world currencies lower.
    Investors are squaring up for a U.S. central bank meeting
next week where policymakers might hint when they plan to cut
interest rates, the prospect of which has supported risky assets
in the recent weeks.      
    The Mexican peso gained 0.3%, still benefiting from 
the announcement of a deal between Mexico and the United States
that averted tariffs on its goods. The Chilean, the
Colombian and the Argentine pesos all weakened.
    Stocks in the region fell, tracking a weak session for Wall
Street's main indexes after U.S. chipmaker Broadcom slashed
sales forecasts due to the U.S.-China trade war and weak
industrial output data out of China.
    The MSCI index of Latin American stocks was
on track to post its biggest percentage drop in a month. 
    Sao Paulo-traded stocks were down about 1% as major
banks fell for a second day on expectations of higher taxes,
while Mexico's main stock index slid nearly 1%.
      
    Key Latin American stock indexes and currencies at 1941 GMT 
    
 Stock indexes                       daily %
                            Latest    change
 MSCI Emerging Markets      1014.12    -0.78
                                     
 MSCI LatAm                 2743.89    -1.69
                                     
 Brazil Bovespa            97813.86    -0.97
                                     
 Mexico IPC                43024.66    -1.05
                                     
 Chile IPSA                 5043.61    -0.56
                                     
 Argentina MerVal          40693.57     0.12
                                     
 Colombia IGBC             12291.06     0.03
                                     
                                            
 Currencies                          daily %
                                      change
                             Latest  
 Brazil real                 3.8925    -0.99
                                     
 Mexico peso                19.1417     0.24
                                     
 Chile peso                   699.8    -0.54
                                     
 Colombia peso              3268.25    -0.04
                                     
 Peru sol                     3.346    -0.48
                                     
 Argentina peso             43.9500    -1.32
 (interbank)                         
                                     
 
 (Reporting by Sruthi Shankar in Bengaluru
Editing by Susan Thomas)
  
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