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EMERGING MARKETS-Latam stocks follow Wall Street lower, Brazil's real dips

Credit: REUTERS/Ricardo Moraes

An index of Latin American stocks fell more than 1% on Friday, mirroring weakness on Wall Street, while Brazil's real dropped as optimism around the proposed overhaul of the country's pension system faded and weak economic data weighed.

By Sruthi Shankar

June 14 (Reuters) - An index of Latin American stocks fell more than 1% on Friday, mirroring weakness on Wall Street, while Brazil's real dropped as optimism around the proposed overhaul of the country's pension system faded and weak economic data weighed.

The real BRL= fell 0.8% to 3.88 per dollar level as the government's proposals to raise the minimum retirement age and workers' contributions to help restore public finances are drawing fierce opposition and look likely to fall short of what President Jair Bolsonaro's government was seeking.

The currency was on track to give back all of its gains from Thursday when a congressional report showed the overhaul would help generate savings of 913.4 billion reais ($237 billion) over the next decade.

In addition, a central bank indicator showed economic activity unexpectedly fell in April, marking the longest stretch of declining activity since the last recession in 2016.

"In our view, a big disappointment in the final expected cost-savings from the pension reform could take BRL (the real) towards the level of 5.0 against the USD," Rabobank analysts wrote in a note.

While analysts added the likelihood of such scenarios were dimming, "adverse global conditions are expected to affect EM (emerging market) assets and economies, limiting the room for a more pronounced BRL rally."

Broad gains for the dollar after encouraging U.S. retail sales data also limited gains for emerging market currencies.

Investors are squaring up for a U.S. central bank meeting next week where policymakers might hint when they plan to cut interest rates, the prospect of which has supported risky assets in the recent weeks. FRX

The Mexican peso MXN= was marginally higher at the end of a week in which the currency outperformed after a deal was struck with United States that averted tariffs on Mexican goods. But the Chilean CLP=, the Colombian COP= and the Argentine ARS= pesos all weakened.

Stocks in the region were also hit following a weak open for Wall Street's main indexes after U.S. chipmaker Broadcom slashed sales forecasts because of the escalating U.S.-China trade war and weak industrial output data out of China. .N

The MSCI index of Latin American stocks .MILA00000PUS dropped about 1%.

Sao Paulo-traded stocks .BVSP were down 0.4% as major banks fell on expectations of higher taxes, while Mexico's main stock index .MXX slid 0.3%.

Key Latin American stock indexes and currencies at 1925 GMT

Stock indexes

Latest

daily % change

MSCI Emerging Markets .MSCIEF

1015.55

-0.64

MSCI LatAm .MILA00000PUS

2759.98

-1.11

Brazil Bovespa .BVSP

98401.29

-0.38

Mexico IPC .MXX

43350.72

-0.3

Chile IPSA .SPCLXIPSA

5061.56

-0.2

Argentina MerVal .MERV

-

-

Colombia IGBC .IGBC

12276.52

-0.08

Currencies

Latest

daily % change

Brazil real BRBY

3.8841

-0.78

Mexico peso MXN=D2

19.1545

0.17

Chile peso CLP=CL

697.8

-0.26

Colombia peso COP=

3268.94

-0.07

Peru sol PEN=PE

-

-

Argentina peso (interbank) ARS=RASL

43.6500

-0.64

(Reporting by Sruthi Shankar in Bengaluru)

((sruthi.shankar@thomsonreuters.com; within U.S. +1 646 223 8780; outside U.S. +91 80 6749 6328; Reuters Messaging: sruthi.shankar.reuters.com@reuters.net))

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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