By Shreyashi Sanyal
July 16 (Reuters) - Most stocks and currencies in Latin America declined on Thursday, as souring relations between the United States and China and surging cases of the COVID-19 drove investors out of riskier assets.
Hurting sentiment further was data which showed unexpected weakness in China's domestic consumption, which underscored the need for more policy support to bolster the recovery. However, China's 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, with investors closely watching headlines about the country.
Geopolitical risks were heightened after the White House said on Wednesday it had not ruled out further sanctions on top Chinese officials to punish China for its handling of Hong Kong.
The United States also said it was studying the national security risks of social media applications including China's TikTok and WeChat.
MSCI's index for Latin American stocks .MILA00000PUS fell 1%, but was still on track for a weekly gain as investors were optimistic about signs of development of a coronavirus vaccine by Moderna Inc MRNA.O.
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.
The Mexican peso MXN= was rangebound on Thursday, with investors keeping a close watch on oil prices.
In Brazil, Economy Minister Paulo Guedes said on Wednesday that his team is studying reducing taxes and encouraging informal workers to file tax returns by granting them up to a 20% bonus over their earnings, what he called a "negative tax."
The real BRBY firmed against the dollar.
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;
Daily % change
MSCI Emerging Markets .MSCIEF
MSCI LatAm .MILA00000PUS
Brazil Bovespa .BVSP
Mexico IPC .MXX
Chile IPSA .SPIPSA
Argentina MerVal .MERV
Colombia COLCAP .COLCAP
Daily % change
Brazil real BRBY
Mexico peso MXN=D2
Chile peso CLP=CL
Colombia peso COP=
Peru sol PEN=PE
Argentina peso (interbank) ARS=RASL
Argentina peso (parallel) ARSB=
(Reporting by Shreyashi Sanyal in Bengaluru Editing by Alistair Bell)
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