May 4, 2020 / 7:39 PM / 24 days ago

EMERGING MARKETS-Brazil's real leads Latam FX lower amid dismal data, U.S.-China tensions

    * Mexican peso among few gainers
    * Factory activity in Mexico and Brazil crumbles
    * Chile's peso eyes worst day in over two weeks

 (Adds comment, updates prices)
    By Susan Mathew and Ambar Warrick
    May 4 (Reuters) - Brazil's real led declines in Latin
American currencies on Monday as a swathe of dire manufacturing
data and rising China-U.S. tensions dented risk sentiment.
    MSCI's index of Latam currencies fell nearly
0.3%. Its stocks counterpart slid 2.2%, with
regional bourses shedding 1% to 2.5%.
    Factory activity in Latin America's largest economies sank
in April as lockdowns to stem the coronavirus outbreak shut
factories and flattened demand.
    Adding to the pain were tensions between the United States
and China, as the two traded barbs over the origin of the
coronavirus outbreak. 
    The threat of fresh U.S. tariffs on China battered risk
appetite, given that Washington and Beijing were yet to fully
deescalate their nearly two-year long trade war.
    The dollar was likely to attract more safe-haven bids in the
face of increased uncertainty, which was set to further pressure
emerging markets in the near term.
    Brazil's real weakened 1.9%, while stocks in Sao
Paulo fell 2.8%. Airline Gol Linhas Aereas Inteligentes
 was among the biggest percentage losers on the
Bovespa after it posted a loss in the first quarter, almost
entirely due to the depreciation of the Brazilian currency.

    The real has lost 28% so far this year, almost
steadily hitting new lows, making it one of the worst-performing
emerging market currencies. 
    Stymied risk appetite due to worries over the coronavirus
pandemic and the related slump in commodity prices were
exacerbated by political instability rocking the flailing
Brazilian economy. 
    "If the pandemic is not controlled, EM will likely be its
next epicentre and EM currencies the weakest link," wrote Bhanu
Baweja, global head of emerging markets cross-asset strategy at
UBS. "Central banks are prioritizing lower rates to fund large
deficits, not higher rates to cushion FX."
    Brazil's central bank is widely expected to cut rates
further into negative territory later in the week, following
similar measures from central banks across the globe as they
shore up liquidity.
    Colombia's peso fell 0.8%, while the world's largest
producer of copper, Chile, saw its currency set for its
biggest percentage loss in two weeks as the price of the metal
sank.
    Mexico's peso, meanwhile, rose 1% after a third
straight month of losses in April. Remittances to Mexico, one of
the country's main sources of foreign exchange, surged to a
record high in March.
    
    Key Latin American stock indexes and currencies at 1918 GMT:
    
    Stock indexes             Latest     Daily % change
 MSCI Emerging Markets          888.60             -3.07
                                        
 MSCI LatAm                    1604.12             -2.15
                                        
 Brazil Bovespa               78244.97             -2.81
                                        
 Mexico IPC                   36099.80             -1.02
                                        
 Chile IPSA                    3883.23             -2.37
                                        
 Argentina MerVal             31976.14            -2.342
                                        
 Colombia COLCAP               1116.85             -2.21
                                        
                                                        
       Currencies             Latest     Daily % change
 Brazil real                     5.454             -1.93
                                        
 Mexico peso                   24.1850              1.58
                                        
 Chile peso                      836.2             -0.12
                                        
 Colombia peso                 3984.92             -0.84
 Peru sol                       3.3837             -0.35
                                        
 Argentina peso                66.9200             -0.12
 (interbank)                            
                                        
 
 (Reporting by Susan Mathew in Bengaluru
Editing by Paul Simao and Leslie Adler)
  
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