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EMERGING MARKETS-Latam stocks at two-week high, FX gains as lifting of lockdowns eyed

Credit: REUTERS/Thomas White

Latin American stocks hit a two-week high on Wednesday amid talks of reopening major economies from coronavirus-related lockdowns, while strength on Wall Street also spilled over.

By Ambar Warrick

April 29 (Reuters) - Latin American stocks hit a two-week high on Wednesday amid talks of reopening major economies from coronavirus-related lockdowns, while strength on Wall Street also spilled over.

Buying into risky assets was somewhat boosted by several parts of the United States and Europe mulling over possible exits from restrictions on business and social activity, as the rate of new infections slowed.

The MSCI's index of Latin American stocks .MILA00000PUS rose 4.8%, touching its highest level since April 14. Bourses in Brazil .BVSP, Chile .SPIPSA and Mexico .MXX all rose more than 1%.

Markets in Brazil, Latin America's largest economy, were cheered by Economy Minister Paulo Guedes flagging more aid for virus-stricken states, while also suggesting that interest rates in the country could fall further into record-low territory.

Wall Street indexes gained after an encouraging update on a potential drug to treat COVID-19, along with some strong first-quarter earnings. .N

Latin American currencies also rose as the increased risk appetite pressured the dollar. Markets were also awaiting the results of a U.S. Federal Reserve meeting later in the day for more cues on how the central bank would navigate the outbreak.

Brazil's real BRBY, BRL= led gains among its peers, recovering sharply from record-low levels hit last week.

The Mexican MXX= and Colombian COP= pesos rose 0.8% and 1%, respectively, tracking a mild recovery in oil prices as the prospect of major economies reopening fed expectations of demand. O/R

Still, a worse than expected contraction in the U.S. GDP - which fell 4.8% in the first quarter - weighed on sentiment, given that the figure only partially reflected the impact of a virus-related lockdown.

The second quarter reading is expected to show the full economic impact of the lockdown, with ING economists forecasting a 40% contraction at an annualized rate.

"Governments across the world are faced with a catch-22 dilemma: easing social distancing and stay-at-home restrictions too early could trigger a second wave of the pandemic, but maintaining various restraints for too long may cause permanent damage to the economy that could lead to a depression," Rabobank analysts wrote in a note.

Emerging market economies are expected to face even greater difficulties than their developed peers from the virus, given that the window for them to lock down economic activity is much smaller due to their heavy reliance on global trade.

Investors are also concerned about countries maintaining their foreign exchange reserves in the face of constraints on movements across borders.

Key Latin American stock indexes and currencies at 1422 GMT

MSCI Emerging Markets .MSCIEF

918.76

1.78

MSCI LatAm .MILA00000PUS

1698.64

4.69

Brazil Bovespa .BVSP

82632.97

1.62

Mexico IPC .MXX

36589.87

2.12

Chile IPSA .SPIPSA

3983.08

2.11

Argentina MerVal .MERV

33828.28

2.309

Colombia COLCAP .COLCAP

1161.83

1.44

Currencies

Latest

Daily % change

Brazil real BRBY

5.3833

2.46

Mexico peso MXN=D2

24.0620

0.87

Chile peso CLP=CL

836.3

1.06

Colombia peso COP=

3985.09

1.09

Peru sol PEN=PE

3.3637

0.69

Argentina peso (interbank) ARS=RASL

66.7400

-0.15

(Reporting by Ambar Warrick in Bengaluru; editing by Jonathan Oatis)

((Ambar.Warrick@thomsonreuters.com; +91-80-6182-2837; Reuters Messaging: ambar.warrick.thomsonreuters.com@reuters.net; Twitter: @AmbarWarrick))

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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