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EMERGING MARKETS-Latam assets weaken on U.S.-China woes; Brazil's real outperforms

Credit: REUTERS/STRINGER Brazil

Most stocks and currencies in Latin America declined on Thursday amid weak data from China and souring Sino-U.S. relations, while Brazil's real outperformed on positive central bank commentary.

By Shreyashi Sanyal and Ambar Warrick

July 16 (Reuters) - Most stocks and currencies in Latin America declined on Thursday amid weak data from China and souring Sino-U.S. relations, while Brazil's real outperformed on positive central bank commentary.

Data showed unexpected weakness in China's domestic consumption, even as the world's second largest economy returned to growth in the second quarter after a deep slump at the start of the year.

China is one of the biggest importers of agricultural products and metals from Latin America.

Increased tensions between Washington and Beijing, over the latter's treatment of Hong Kong, also weighed down broader sentiment.

MSCI's index for Latin American stocks .MILA00000PUS fell 1.3%, while most currencies also traded lower to the dollar.

The Mexican peso MXN= fell about 0.5%, while Colombia's peso COP= lost 0.7% tracking a fall in oil prices. O/R

"Following a sharp recovery, oil prices have struggled to firm further amid slowing energy demand growth, just as U.S. shale production appears to stabilize and OPEC+ tapers its historic cuts," analysts at TD Securities wrote in a note.

"Notwithstanding, decomposing market expectations, we find that energy markets have already discounted easing supply-side support. And, we continue to expect significant deficits on the horizon nonetheless."

Energy sector stocks, such as Brazil's Petrobras PETR4.SA, also lagged for the day.

Brazil's real BRBY rose about 1.3% after Central Bank President Roberto Campos Neto expressed some optimism over the economy and measures taken to shield it from the coronavirus.

Still, he said that a post COVID-19 recovery was likely to be slow.

In what is likely to benefit the real, Brazilian meat companies are poised to increase production and exports this year, according to ABPA, a lobby group representing pork and chicken suppliers.

Cases continued to surge in South America, with Mexico reporting 6,149 new confirmed coronavirus infections on Wednesday and 579 additional fatalities, bringing the total in the country to 317,635 cases and 36,906 deaths.

Agricultural exports to China have also been impacted as Argentina suspended exports to China from eight meatpacking plants and the Chinese government asked Brazil to suspend exports from two meat plants over coronavirus concerns.

Chilean markets were shut on Thursday due to a public holiday. On Wednesday, Chile's central bank kept its benchmark interest rate steady at 0.5% as per market expectations.

Key Latin American stock indexes and currencies:

Stock indexes

Latest

Daily % change

MSCI Emerging Markets .MSCIEF

1046.08

-1.9

MSCI LatAm .MILA00000PUS

1981.57

-1.28

Brazil Bovespa .BVSP

100535.68

-1.23

Mexico IPC .MXX

36392.45

-0.54

Argentina MerVal .MERV

45408.93

0.639

Colombia COLCAP .COLCAP

1147.84

0.26

Currencies

Latest

Daily % change

Brazil real BRBY

5.3145

1.29

Mexico peso MXN=D2

22.4385

-0.52

Colombia peso COP=

3640.4

-0.71

Peru sol PEN=PE

3.5038

-0.29

Argentina peso (interbank) ARS=RASL

71.4100

-0.07

(Reporting by Shreyashi Sanyal in Bengaluru Editing by Alistair Bell and Marguerita Choy)

((Shreyashi.Sanyal@thomsonreuters.com; +1 646 223 8780; +91 961 144 3740; Twitter: https://twitter.com/s_shreyashi;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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