August 1, 2019 / 3:07 PM / in 7 months

EMERGING MARKETS-Latam currencies slide as further Fed rate cuts uncertain

    * Latam FX on track to post worst day since late-March 
    * Emerging-market stocks on worst run in almost a year
    * Fed cuts rates by 25 basis points, further cuts uncertain

    By Agamoni Ghosh
    Aug 1 (Reuters) - Latin American currencies were on track to
post their worst day in nearly five months on Thursday as
investors scurried from riskier assets and piled on to the
safe-heaven U.S. dollar after the U.S. Federal Reserve dampened
hopes for a long interest rate-cutting campaign. 
    The U.S. central bank's policy-setting Federal Open Market
Committee (FOMC) cut rates as expected on Wednesday but Fed
Chairman Jerome Powell said the move might not be the start of a
lengthy campaign to shore up the economy against risks,
disappointing investors who hoped for a more dovish stance.

    Emerging market assets, which had rallied earlier in the
year in anticipation of a more supportive stance by the Fed,
fell to one-month lows, with developing world stocks
on track to post their longest run of declines in almost a year.

    "The hawkish cut from the FOMC opens up increased monetary
policy divergence between the U.S. and EM as many emerging
market central banks have embarked on easing cycles, some in
aggressive fashion," Morgan Stanley analysts said in a note. 
    "USD strength is the natural outcome and we would need to
see the Fed taking a more dovish stance in future to halt the
    Weak manufacturing data from around the world added to the
dour mood fuelling worries a prolonged U.S.-China trade war and
an economic slowdown could tilt the world towards recession, and
central banks would have to fight with depleted ammunition.

    Brazil's real fell about 0.5% a day after the central
bank kicked off an easing cycle with a sharper rate cut than
most economists expected and after data showed manufacturing
slowed in Latin America's largest economy in July.  
    A jump in financial stocks, however, helped push Sao Paulo's
Bovespa higher, but Vale shed over 2% after
the miner said it swung to a quarterly loss after giving $2
billion in fresh writedowns for two deadly dam bursts.

    Mexican stocks were flat, while the peso slid
marginally. Mexico's Finance Ministry lowered its growth
forecast for 2019 to 1.1% as evidence mounts that Latin
America's second-largest economy is falling short of the
government's expectations.
    The Colombian and Argentinian pesos, each shed
over 1%.  
  Key Latin American stock indexes and currencies at 1440 GMT
 Stock indexes                                    daily %
                            Latest                 change
 MSCI Emerging Markets              1030.93         -0.59
 MSCI LatAm                         2845.14          0.05
 Brazil Bovespa                   103614.93          1.29
 Mexico IPC                        40825.85         -0.09
 Chile IPSA                         4987.21           0.3
 Argentina MerVal                  42359.39           0.7
 Colombia IGBC                     12709.51         -0.14
 Currencies                                       daily %
                                     Latest        change
 Brazil real                         3.8056         -0.47
 Mexico peso                        19.1700         -0.23
 Chile peso                           704.6         -0.17
 Colombia peso                      3321.42         -1.29
 Peru sol                             3.316         -0.36
 Argentina peso                     44.2600         -1.14

 (Reporting by Agamoni Ghosh in Bengaluru
Editing by Paul Simao)
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