August 7, 2019 / 2:50 PM / a month ago

EMERGING MARKETS-Growth worries send Latam markets into a tailspin

    By Sruthi Shankar
    Aug 7 (Reuters) - Latin American markets were swept up in a
global sell-off of risk assets on Wednesday as investors sought
safety in U.S. government debt and gold on fears that an
escalating U.S.-China trade war will push the world's largest
economy toward recession.
    Benchmark U.S. Treasury yields fell across the board, with
the yield curve between three-month bills and 10-year notes
inverting to its deepest level since March 2007. This inversion
has preceded every U.S. recession in the past 50 years.
    Evoking those fears were surprise interest rate cuts from a
series of Asian central banks earlier in the day and weak German
economic data, which added to worries about a worsening of the
U.S.-China trade war.
    "With the outlook for the global economy taking a turn for
the worse on the back of recent trade escalation and continued
weak data, central banks are not hanging around before acting,"
Morgan Stanley analysts wrote in a note.
    "One of the reasons for downgrading our view on EM
currencies was the monetary policy divergence that opened up
between a more hawkish-than-expected FOMC and still dovish EM
central banks."
    The Brazilian real fell more than 0.7% even as the
country's lower house of Congress approved the text of a
far-reaching pension reform bill in a second round of voting.
The currency has dropped in seven of the past eight
days.
    The Mexican, Argentine, Chilean and 
Colombian pesos all fell between 0.2% and 0.9%.
    Financial markets have taken a beating this week after China
let the yuan fall past the psychologically important 7 per
dollar level on Monday amid growing U.S. tariff pressure,
injecting volatility into currency markets.
    Meanwhile, the MSCI's widely tracked MSCIEF index,
which includes almost 1,200 stocks from 26 developing world
countries, was down for an 11th straight day.
    If it cannot recover before the close, it will be confirmed
as the second longest losing streak ever, only exceeded by two
12-day runs in 2015 when Greece's debt crisis was building to a
climax, and before that all the way back in September 1990.
    Brazil's main Bovespa index fell more than 1%,
mirroring losses in most emerging stock markets.

    Latin American stock indexes and currencies at 1422 GMT:
    
   Stock indexes           Latest    Daily %
                                     change
 MSCI Emerging Markets       969.28    -0.35
                                     
 MSCI LatAm                 2669.01    -0.87
                                     
 Brazil Bovespa           101111.60    -1.03
                                     
 Mexico IPC                39639.00    -0.37
                                     
 Chile IPSA                 4776.63    -0.03
                                     
 Argentina MerVal          40809.64    -1.23
                                     
 Colombia IGBC             12328.00     0.62
                                     
                                            
      Currencies           Latest    Daily %
                                     change
 Brazil real                 3.9840    -0.72
                                     
 Mexico peso                19.6880    -0.58
                                     
 Chile peso                   714.8    -0.64
                                     
 Colombia peso                 3436    -0.32
                                     
 Peru sol                     3.382    -0.21
                                     
 Argentina peso             45.7100    -0.90
 (interbank)                         
                                     
 

 (Reporting by Sruthi Shankar in Bengaluru; additional reporting
by Marc Jones in London; editing by Jonathan Oatis)
  
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