October 2, 2019 / 8:40 PM / 5 months ago

EMERGING MARKETS-Latam stocks see worst day in over 1 month on growth worries

 (Adds fresh comment, updates prices)
    By Susan Mathew
    Oct 2 (Reuters) - Latin American stocks slumped on
Wednesday, tracking a sell-off on Wall Street after more dismal
economic data from the United States had deepened investors
worries about the health of the world's largest economy. 
    MSCI's index of Latam stocks fell 1.7% to
their worst day since Aug 26 after a report on U.S. private
sector hiring suggested that fallout from the U.S.-China trade
war is hurting the U.S. economy.
    That followed a surprise fall in U.S. manufacturing on
Tuesday that knocked sentiment across the globe.
    Shares in Mexico lost more than 1.6%, while those in
Brazil sank nearly 3%, both being on course to post
their worst session in 1-1/2 months. 
    Mexico's economy had barely escaped recession in the first
half of the year, and deteriorating economic indicators point to
sustained weakness despite the central bank's assurances of a
slight economic recovery for the rest of 2019. 
    "We see downside risk to the consensus earnings growth
expectations (in Mexico) in the light of deteriorating GDP
growth dynamics," wrote analysts at UBS in a note pointing also
to uncertainty over the ratification of the United
States-Mexico-Canada trade deal.
    In Brazil, investors were also closely watching the pension
reform as the Senate concludes its first round of voting on the
bill later in the day.
    The main text of the bill was approved by the Senate on
Tuesday but it rejected a key amendment in a move that dilutes
its overall fiscal impact by 76 billion reais ($18 billion).

    Colombian shares fell to a three week low, while
Chile stocks extended losses to a third straight
    Regional currencies, meanwhile, capitalized on the dollar's
    Mexico's peso broke a five-session losing streak and
was up 0.16%. Mexico will soon unveil a set of major
infrastructure projects drawn up by the private sector to lift
the economy, President Andres Manuel Lopez Obrador said on
Wednesday, as he sought to assuage recession concerns.

    Brazil's real was on-track for its best day in 3-1/2
weeks, up 0.6%. But UBS analysts warn of deterrents to a
sustained rally in Brazil's real, citing low interest rates as
being one that will persistently affect the currency.
    The central bank has cut interest rates twice this year and
UBS' emerging market strategists Ronaldo Patah and Alejo
Czerwonko expect another 50 basis points (bps) cut in October a
25-bps slash in December. 
    "Even as the cost of country's credit default swaps is close
to its lowest ever levels, the equilibrium of the currency has
moved to a weaker level," they said. 
    Argentina's peso extended gains to a fifth day, while
Chile's currency firmed more than half a percent.
    Key Latin American stock indexes and currencies at 2009 GMT:
    Stock indexes             Latest    Daily %
 MSCI Emerging Markets          989.54      -0.9
 MSCI LatAm                    2602.54     -1.66
 Brazil Bovespa              101089.39     -2.85
 Mexico IPC                   42231.02     -1.64
 Chile IPSA                    5021.67     -0.42
 Argentina MerVal             30741.53     2.246
 Colombia IGBC                12758.01     -0.77
       Currencies             Latest    Daily %
 Brazil real                    4.1336     -0.03
 Mexico peso                   19.8005      0.07
 Chile peso                      724.7      0.55
 Colombia peso                 3492.75      0.01
 Peru sol                        3.388     -0.06
 Argentina peso                57.8200     -0.29
 (Reporting by Susan Mathew in Bengaluru; 
Editing by Sandra Maler)
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