March 16, 2020 / 2:58 PM / 13 days ago

EMERGING MARKETS-Mexico's peso falls 5%, other Latam FX down amid virus panic

    * U.S. Fed cuts rates by 100 bps
    * Investors worry about Pemex downgrade as oil prices slide
    * Brazil unveils economic measures to support economy
    * UBS calls for immediate 100 bps cut by Brazil central bank

    By Susan Mathew
    March 16 (Reuters) - The Mexican peso sank as much as 5% on
Monday, hitting new lows as oil prices tumbled, while Brazil's
peso fell 2% as another emergency cut by the U.S. Federal
Reserve did little to calm markets about the fast-spreading
coronavirus.
    Regional stocks also slumped, in line with global markets.
Brazil shares gave up as much as 14.3%, while those in
Chile, Argentina and Colombia lost between 8.4% and 10.7%.

    The Fed cut interest rates by 100 basis points to near zero
and pledged to expand its balance sheet by at least $700 billion
in the coming weeks, joining a coordinated move by global
central banks to combat the economic fallout from the deadly
flu-like virus.
    "While rate cuts and quantitative easing may go some way to
alleviate financial market stress, market participants are also
looking for... other policy measures, including fiscal measures,
to offset the... blow that the coronavirus pandemic has dealt,"
wrote Elena Duggar, an associate managing director at Moody's.
    As oil prices slid, with Brent falling 10%, and U.S. crude
to below $30, Mexico's peso slipped to 23.05 to the
dollar as investors worried about the impact of the oil slide on
state oil firm Pemex.
    With a debt of more than $100 billion, Pemex is Latam's most
indebted company and reported one of its worst-ever losses last
year. After rating agency Fitch downgraded the company's bonds
to junk last year, it faces the threat of similar action from
S&P and Moody's which would spark an exodus from Pemex bonds by
funds that are mandated to hold investment-grade bonds.
    Mexican stocks were shut for a local holiday.  
    Brazil's real hovered near record lows. The
government on Monday approved a raft of measures to combat the
economic and financial damage from the virus, boosting liquidity
in the financial system, maintaining the flow of credit in the
economy and expanding banks' lending capacity.
    Economists at Swiss investment bank UBS on Monday called for
an "immediate" 100 basis point cut in Brazil's benchmark Selic
interest rate to 3.25%. A central bank survey showed the outlook
for Brazil's economy deteriorated sharply.

    Sao Paulo's Bovespa index triggered a circuit break
after it fell 10% and went on to steepen losses after it
restarted.
    Carrier Azul tumbled 23% as it canceled all
international flights. Smiles Fidelidade, carrier
Gol's loyalty program, crashed 28% after Gol dropped
its bid for Smiles.     
    All eyes will now be on a Group of Seven teleconference
underway to discuss the health crisis.
    
    Key Latin American stock indexes and currencies at 1435 GMT:
   Stock indexes           Latest    Daily %
                                     change
 MSCI Emerging Markets       835.81    -6.21
                                     
 MSCI LatAm                 1682.29   -10.83
                                     
 Brazil Bovespa            74014.89   -10.48
                                     
 Chile IPSA                 3361.19   -10.69
                                     
 Argentina MerVal          25532.12   -10.25
                                     
 Colombia COLCAP            1075.21    -8.44
                                     
                                            
      Currencies           Latest    Daily %
                                     change
 Brazil real                 4.9382    -2.60
                                     
 Mexico peso                22.6730    -3.40
                                     
 Chile peso                   850.5    -1.45
                                     
 Colombia peso              4075.45    -1.34
                                     
 Peru sol                      3.52    -0.01
                                     
 Argentina peso             63.0000    -0.16
 (interbank)                         
                                     
 
 (Reporting by Susan Mathew in Bengaluru; Editing by Dan
Grebler)
  
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