Mexican peso leads Latam FX lower as investors exit risk assets
Services see highest growth in 2 years in Brazil- PMI
Bradesco jumps after results
FX down 0.2%, stocks off 1.5%
Updated at 3 p.m. ET/1900 GMT
By Ankika Biswas and Lisa Pauline Mattackal
Aug 5 (Reuters) -Indexes tracking Latin American assets tumbled to over one-year lows against the dollar on Monday, spearheaded by the Mexican peso, as investors grappling with U.S. recession fears flocked to safe-haven assets, such as the Japanese yen.
The MSCI Latam stocks index .MILA00000PUS was 1.5% lower, while the currencies index .MILA00000CUS was last down 0.2%, with both off the day's lows and suggesting less selling pressure.
Mexico's peso MXN= touched a near two-year low, breaching the 20 pesos-per-dollar barrier, before paring much of the losses. It was last down 1.5%.
Among others, the Colombian peso COP= was 0.6% lower, hitting a near one-year low intraday. Currencies of both Mexico and Colombia, top oil exporters, were also hurt by weakness in the commodity's prices.
The Chilean peso CLP= and Peruvian sol PEN= were also dragged 0.3% and 0.2% lower, respectively, in broad-based declines. Copper prices tumbling to 4-1/2 month lows also weighed on the leading producers' currencies.
The Brazilian real BRL= briefly hit its lowest level in over three years against the dollar, but pared most of the losses to trade just 0.1% lower with data showing the Brazilian services sector recorded the biggest expansion in two years in July.
Meanwhile, theyen JPY=EBS leapt against the dollar as crowded carry trades unwound, pressuring emerging market currencies that have benefited from the strategy where investors borrow in currencies of countries with lower rates and invest in assets offering higher returns.
A raft of economic data last week raised fears of a U.S. recession, sending shock waves across financial markets on Monday, which compounded concerns for emerging markets struggling with worries in China, poor tech earnings, and escalating geopolitical tensions.
With U.S. economic concerns at the fore, traders are now pricing in a 50-basis-point rate cut at the Federal Reserve's September meeting, compared to a 25 bps broadly expected last week as per CME's FedWatch.
"Downside risks to EM GDP growth are building... weaker demand from the U.S. would hit EM exports, with Mexico most affected, followed by economies in East Asia," wrote William Jackson, Capital Economics' chief EM economist.
"The latest developments may, on balance, result in EM central banks adopting a more dovish stance."
Interest rates decisions out of Mexico and Peru are also at the top of investors' watch lists for the week.
Chilean stocks .SPIPSA bore the brunt of Latam's equity selloff, with a 3.3% decline. Argentine stocks .MERV, however, came sharply off their lows after dropping nearly 7% in early trade.
On a more upbeat note, shares of Brazil's Bradesco BBDC4.SA jumped 8%, bucking broader declines on the Bovespa index after the lenderreported better-than-expected second-quarter net profit.
Key Latin American stock indexes and currencies:
Equities | Latest | Daily % change |
MSCI Emerging Markets .MSCIEF | 1016.18 | -4.25 |
MSCI LatAm .MILA00000PUS | 2090.7 | -1.63 |
Brazil Bovespa .BVSP | 124971.59 | -0.7 |
Mexico IPC .MXX | 51807.7 | -0.83 |
Chile IPSA .SPIPSA | 6104.52 | -3.34 |
Argentina Merval .MERV | 1421409.15 | -0.833 |
Colombia COLCAP .COLCAP | 1289.29 | -2.09 |
Currencies | Latest | Daily % change |
Brazil real BRL= | 5.7324 | -0.09 |
Mexico peso MXN= | 19.4751 | -1.63 |
Chile peso CLP= | 953.23 | -0.3 |
Colombia peso COP= | 4155.5 | -0.61 |
Peru sol PEN= | 3.7134 | -0.02 |
Argentina peso (interbank) ARS=RASL | 934.5 | -0.107009096 |
Argentina peso (parallel) ARSB= | 1370 | 1.824817518 |
Reporting by Lisa Mattackal and Ankika Biswas in Bengaluru; Editing by Tomasz Janowski and Nick Zieminski
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