August 2, 2019 / 8:28 PM / 6 months ago

EMERGING MARKETS-Brazil's real hits 6-week low as trade tensions intensify

    * Petrobras posts its highest-ever quarterly profit
    * Latin American currencies suffer worst day in 2019
    * Brazil's real weakens to lowest level in six weeks 

 (Updates prices, adds analyst comment)
    By Sruthi Shankar
    Aug 2 (Reuters) - Brazil's real hit a six-week low on
Friday, leading losses among Latin American currencies as an
escalation in U.S.-China trade tensions turned investors
risk-averse, although upbeat production numbers from oil firm
Petrobras lifted Sao Paulo- listed shares.  
    The MSCI index of Latin American currencies
extended its slide for a second day and was on course to post
its worst week of 2019 after U.S. President Donald Trump on
Thursday vowed to hike tariffs on Chinese imports starting on
Sept. 1, prompting retaliation from Beijing.
    Emerging market assets had already been under pressure this
week after the U.S. Federal Reserve played down expectations of
many interest rate cuts this year, underwhelming many investors
who had hoped for a more dovish stance.  
    The real sank for the fifth day, touching its weakest
level in over six weeks at 3.8927, with investors eyeing a
second round of votes on the pension reform bill in the lower
house of Congress next week. 
    "With no significant local triggers on the horizon, the
BRL's direction will be dictated by the broad USD. The pension
reform story has played out," Citi analysts wrote in a note.
    A broadly firm dollar hurt other currencies, with Mexico's
peso, the Colombian peso and the Chilean peso
 falling between 0.4% and 1.3%.
    Stock markets in the region mostly fell, although Brazil's
Bovespa bucked the trend.
    Shares of Petrobras jumped 4% after the
state-owned company posted a long-awaited production boost in
July  and recorded its highest-ever quarterly profit.

    Meanwhile, Vale's shares fell more than 1% as
iron ore prices slumped after a resumption at the company's
largest mine pushed Brazil's iron ore exports to a nine-month
    Mexico's IPC index and stocks in Chile
recorded their fourth straight week of losses, while shares in
Colombia were supported by recovering prices of oil, the
country's top export.       
    A central bank forecast showed Colombia's current account
deficit will expand to 4.4% of gross domestic product this year,
resulting from an increase in imports and a fall in the export
of commodities like coal and the meager performance of the
country's trading partners.    
  Key Latin American stock indexes and currencies at 1954 GMT:
   Stock indexes           Latest    Daily %
 MSCI Emerging Markets      1002.45    -2.16
 MSCI LatAm                 2757.22    -1.37
 Brazil Bovespa           102494.16     0.36
 Mexico IPC                40038.93    -0.76
 Chile IPSA                 4894.24    -0.94
 Argentina MerVal          41416.36    0.012
 Colombia IGBC             12604.63     0.69
      Currencies           Latest    Daily %
 Brazil real                 3.8893     -1.3
 Mexico peso                19.3110    -0.41
 Chile peso                   712.5    -0.86
 Colombia peso                 3382    -1.28
 Peru sol                     3.355    -0.86
 Argentina peso             44.6200    -0.52
 (Reporting by Sruthi Shankar in Bengaluru
Editing by Matthew Lewis)
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