July 30, 2020 / 2:12 PM / 9 days ago

EMERGING MARKETS-Mexican peso tumbles on record GDP contraction

    * Mexico's GDP falls to record 17.3% in second quarter
    * Brazil hits record 69,000 daily coronavirus cases  
    * Argentina may delay debt restructuring deadline amid

    By Shreyashi Sanyal
    July 30 (Reuters) - Mexico's peso was set for its worst day
in two weeks on Thursday after data showed Latin America's
second biggest economy contracted by double digits in the second
quarter, while other currencies in the region slipped on surging
coronavirus cases.   
    The peso fell as much as 1.3% against the dollar
after preliminary figures from the INEGI national statistics
agency showed gross domestic product shrank 17.3% in the second
quarter, the sharpest drop on record.
    With Mexico still struggling with its coronavirus outbreak,
and the U.S. recovery seemingly losing steam, the rebound in
Mexico's economy will be slow over the coming quarters, said
Nikhil Sanghani, assistant economist at Capital Economics.
    Sanghani also said the data bolsters bets for the Mexican
central bank to continue its easing cycle. "We expect a total of
100bp of further rate cuts this year, including a 50bp reduction
at the central bank's next meeting in August," he said.
    Wall Street opened lower after data showed the U.S. economy
contracted at its steepest pace since the Great Depression in
the second quarter as the COVID-19 pandemic shattered consumer
and business spending, and a nascent recovery is under threat
from a resurgence in new cases of the coronavirus.

    Currencies in other parts of Latin America also weakened,
with Brazil's real falling 0.3% as the country set daily
records on Wednesday for new COVID-19 cases and deaths.
    The Colombian peso dropped as oil prices declined,
and a Reuters poll showed Colombia's economy will have suffered
the worst contraction in its history in the second quarter
because of fallout from a coronavirus quarantine. 
    Local investors are also awaiting a central bank policy
decision on Friday, where the Colombian central bank, or Banrep,
as it is also known, is expected to slash its benchmark interest
rate by 25 basis points.d
    In Argentina, the government is considering pushing back a
deadline for creditors to respond to its foreign debt
restructuring proposal until mid- to late August, a source close
to the negotiations told Reuters on Wednesday.    
    The MSCI's Latin American stocks index fell
1.5%, with Brazil's Bovespa off 0.8% and Santiago shares
 off 1.4%.  
    Brazilian telecoms firm TIM Participações SA fell
2.5% after reporting a 23.9% drop in second-quarter net income
compared with the same period a year ago. 
    Key Latin American stock indexes and currencies:
        Stock indexes                   Latest      Daily %
 MSCI Emerging Markets                    1081.21       -0.5
 MSCI LatAm                               2099.92       -1.5
 Brazil Bovespa                         104769.89      -0.79
 Mexico IPC                              37609.17       -0.3
 Chile IPSA                               3927.57       -1.4
 Argentina MerVal                            0.00          0
 Colombia COLCAP                          1163.37      -0.98
            Currencies                  Latest      Daily %
 Brazil real                               5.1740      -0.25
 Mexico peso                              22.1638      -0.92
 Chile peso                                 751.7       0.67
 Colombia peso                            3733.18      -0.77
 Peru sol                                  3.4968       0.03
 Argentina peso (interbank)               72.2500      -0.07
 Argentina peso (parallel)                    131       3.05

 (Reporting by Shreyashi Sanyal in Bengaluru; editing by
Jonathan Oatis)
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