May 17, 2018 / 9:37 PM / 6 months ago

EMERGING MARKETS-LatAm stocks, currencies slide as U.S. yields rise

 (Recasts throughout, adds analyst comment)
    By Paula Laier
    SAO PAULO, May 17 (Reuters) - Brazilian stocks fell by the
most in a year on Thursday while Mexican stocks closed at their
lowest since the start of 2017, as rising U.S. Treasury yields
sparked a sell-off of riskier assets around the globe.
    Latin American currencies also suffered, with the Mexican
peso shedding around 0.8 percent against the U.S.
dollar while Brazil's real closed over 0.7 percent weaker.
    Emerging market currencies have been taking a beating this
month as higher U.S. yields sap demand for riskier assets. U.S.
Treasury yields hit near seven-year highs on Thursday.

    "All emerging market currencies are dealing with a stronger
U.S. dollar and ongoing expectations of rising rates in the
United States," said Gerardo Zamorano, director of investments
at Brandes Investment Partners in San Diego. 
    The steep sell-off in currencies has sparked a turn to more
hawkish rhetoric by both Brazil's and Mexico's central banks.
    Brazil's central bank unexpectedly left its benchmark rate
untouched at 6.50 percent late Wednesday, despite widespread
expectations of a 25 basis-point cut.
    Now the market in Brazil is betting on when the central bank
could lift borrowing costs, which could crimp corporate profits
as debt costs rise. 
    "The stock market was heading for a recovery," said Leandro
Martins an analyst at Modalmais. The central bank's move
"totally changed the scenario."
    Brazil's Bovespa stock index sank 3.37 percent, its
biggest one-day percentage drop since May 2017.
    Mexico's benchmark IPC stock index fell more than 1.3
percent to close at its lowest level in 16 months. 
    Mexico's central bank held its benchmark interest rate
steady on Thursday, but policymakers warned that uncertainty
surrounding trade talks with the United States and Canada as
well as domestic elections could negatively affect the peso.

    Nomura economists said Brazil's October presidential
election, widely seen as the hardest to predict in decades,
could also weigh on appetite for the nation's assets going
forward.
    
    Key Latin American stock indexes and currencies at 2000 GMT:
    
 Stock indexes                 Latest      Daily     YTD
                                             pct     pct
                                          change  change
 MSCI Emerging Markets          1,142.86   -1.06   -0.29
                                                  
 MSCI LatAm                     2,748.56   -2.74   -0.08
 Brazil Bovespa                83,866.54   -3.09    9.77
 Mexico IPC                    45,794.70   -1.35   -7.21
 Chile IPSA                     5,684.54   -0.76    2.16
 Chile IGPA                    28,742.67   -0.74    2.72
 Argentina MerVal              31,824.70    0.52    5.85
 Colombia IGBC                 12,189.10   -1.43    7.20
 Venezuela IBC                 22,502.78    3.24  1681.5
                                                       0
 Currencies                       Latest   Daily     YTD
                                             pct     pct
                                          change  change
 Brazil real                      3.7046   -0.73  -10.56
 Mexico peso                     19.7275   -0.80   -0.14
 Chile peso                       632.35   -0.30   -2.80
 Colombia peso                   2,903.9   -1.54    2.69
 Peru sol                          3.273   -0.31   -1.10
 Argentina peso (interbank)      24.3000   -0.04  -23.46
                                                  
 Argentina peso (parallel)          25.1   -0.40  -23.39
                                                  
 

 (Additional reporting by Rodrigo Campos in New York; Editing by
Tom Brown)
  
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