August 1, 2019 / 8:22 PM / 19 days ago

EMERGING MARKETS-Latam markets slide as Trump hits China with new tariffs

    * Latam FX posts worst day since late-March 
    * Fed cuts rates by 25 basis points, further cuts uncertain
    * Trump's plan for fresh China tariffs jolt markets 

 (Recasts throughout, updates with closing prices)
    By Sruthi Shankar
    Aug 1 (Reuters) - Latin American currencies and stocks
tumbled on Thursday after U.S. President Donald Trump said he
would impose additional tariffs on Chinese goods, driving
investors to dump risky assets on fears of a further hit to
global growth.
    The MSCI index of Latin American currencies
fell about 1.75%, its biggest percentage decline in over four
months, with Brazil's real shedding slightly more than 
1% to touch its weakest level since early July.
    Trump said he would impose an additional 10% tariff on $300
billion worth of Chinese imports starting Sept. 1, as talks
aimed at easing tensions between the world's two largest
economies continue.
    "It's just more friction in the global economy and a
situation where the market has been betting on this situation
getting better and then having the benefit of interest rate
cuts, and now the situation is getting worse. I would expect we
see risk-off trading for the next week or two," said Michael
O'Rourke, chief market strategist at JonesTrading.
    Emerging market currencies were already under pressure from
a resurgent dollar after the U.S. Federal Reserve on Wednesday
dampened hopes for a long interest rate-cutting campaign, hopes
of which had encouraged capital flows into risky, emerging
assets this year.
    "The hawkish cut from the FOMC opens up increased monetary
policy divergence between the U.S. and EM as many emerging
market central banks have embarked on easing cycles, some in
aggressive fashion," Morgan Stanley analysts said in a note.
    The latest was Brazil's central bank, which cut its
benchmark interest rate to a new low of 6.00% on Wednesday, an
aggressive first move in a widely anticipated easing cycle as it
noted that growth in Latin America's biggest economy remained
weak.
    Currencies of resource-rich Latin America were also hit by a
7% slump in oil prices and other commodities such as copper and
iron ore. The Colombian peso, down 1.8%, was the worst
hit due to sliding prices of oil, the country's top export.
 
    Sao Paulo-listed stocks bucked the gloom, gaining
0.2% as shares in food processor JBS SA jumped 5%
after its Pilgrim's Pride Co unit reported
better-than-expected quarterly profit.
    Shares of state-run electricity company Eletrobras
 rose more than 6% on news President Jair Bolsonaro
will meet with the chief executive to discuss the company's
"potential privatization." 
    Miner Vale shed more than 2.5% after it said it
swung to a quarterly loss after giving $2 billion in fresh
writedowns for two deadly dam bursts.
    Mexican stocks were down 1%, while the peso
slid after data showed activity in the country's manufacturing
sector shrank in July compared with the previous month, the
second straight contraction.    
    
  Key Latin American stock indexes and currencies at 2000 GMT:  
   Stock indexes           Latest    Daily %
                                     change
 MSCI Emerging Markets      1021.84    -1.46
                                     
 MSCI LatAm                 2782.45    -2.15
                                     
 Brazil Bovespa           102001.38     0.19
                                     
 Mexico IPC                40373.36     -1.2
                                     
 Chile IPSA                 4946.60    -0.52
                                     
 Argentina MerVal          41357.25     -1.6
                                     
 Colombia IGBC             12505.17    -1.74
                                     
                                            
      Currencies           Latest    Daily %
                                     change
 Brazil real                 3.8473    -0.87
                                     
 Mexico peso                19.2367    -0.57
                                     
 Chile peso                   706.8    -0.48
                                     
 Colombia peso               3338.7    -1.81
                                     
 Peru sol                     3.326    -0.66
                                     
 Argentina peso             44.3600    -1.06
 (interbank)                         
                                     
     
    

 (Additional reporting by Agamoni Ghosh in Bengaluru and Sinead
Carew in New York; Editing by Dan Grebler
)
  
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below