Latam FX stutters as US slowdown worries dampen risk appetite
Bets rise on 50 bps Fed cut in September
Global stocks selloff amid growth worries
EM bond funds see outflows over past week: BofA
Updated at 3:30 p.m. ET/ 1930 GMT
By Lisa Pauline Mattackal and Shashwat Chauhan
Aug 2 (Reuters) - Most Latin American currencies came under pressure on Friday, as investors refrained from indulging in risky assets after a U.S. jobs report heightened concerns of an economic slowdown in the world's largest economy, with equities selling off as well.
Mexico's peso MXN= was the worst hit, down 1.4% to 19.11 per dollar, falling below 19 per dollar for the first time since March 2023, on track for its third successive weekly decline.
Global markets ran into turbulence after data showed the U.S. unemployment rate jumped to near a three-year high of 4.3% in July amid a significant slowdown in hiring, heightening fears the labor market was deteriorating and potentially making the economy vulnerable to a recession.
"This morning's employment reading adds to recent data of an economy slowing at an increasingly rapid pace and now puts the Fed on their heels as they appear to be behind the curve on rate cuts," said Steve Wyett, chief investment strategist at BOK Financial.
Expectations for the Federal Reserve to cut by 50 basis points (bps), instead of 25 bps jumped from 22% to over 73% following the data, according to the CME's FedWatch tool.
Colombia's peso COP= dropped 1.3%, while Peru's sol PEN= edged 0.1% higher.
Brazil's real BRL= and Chile's peso CLP= were the outliers, up 0.7% and 0.1%, respectively.
Equity markets around the world were embroiled in a selloff, in-line sharp losses seen on Wall Street and in developed Europe. MSCI'sindex of emerging market stocks .MSCIEF, too slumped 2.2%, set to clock its worst day since February 2023, if losses hold.
Markets in Latin America also tumbled, with indexes of regional currencies .MILA00000CUS and stocks .MILA00000PUS down 1.4% and 2.5%, respectively, both at their lowest levels since last October.
Local bourses of Argentina.MERV, Brazil .BVSP, Colombia .COLCAP and Mexico .MXX were downbetween 0.5% and 4%.
The moves capped a hectic week for emerging market assets. An initial boost to risk sentiment following the Fed'smeeting on Wednesday quickly gave way to concerns over global growth, after weak U.S. data, geopolitical worries in the Middle East and further signs of economic slowdown in China.
MSCI's EM stock index was on track to fall for a third straight week, however, the currency index was set to rise about 0.7% inits best week since December.
However, Latin American assets were set to underperform, with the stocks index on track to fall over 3% and currencies down about 1.5%.
EM debt-focused funds saw outflows of $0.2 billion over the past week, according to data from Bank of America Global Research, though EM equity funds have seen about $4.5 billion in inflows over the past nine weeks.
Meanwhile,Venezuela's government accused the U.S. of being behind what it called a coup attempt, as some regional governments recognized the opposition candidate as the winner of the country's disputed presidential election.
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Key Latin American stock indexes and currencies:
Equities | Latest | Daily % change |
MSCI Emerging Markets .MSCIEF | 1063.69 | -2.22 |
MSCI LatAm .MILA00000PUS | 2130.22 | -2.50 |
Brazil Bovespa .BVSP | 125998.73 | -1.1 |
Mexico IPC .MXX | 52135.63 | -0.54 |
Chile IPSA .SPIPSA | 6299.51 | -1.85 |
Argentina Merval .MERV | 1440623.81 | -3.972 |
Colombia COLCAP .COLCAP | 1320.49 | -1.59 |
Currencies | Latest | Daily % change |
Brazil real BRL= | 5.7097 | 0.67 |
Mexico peso MXN= | 19.112 | -1.42 |
Chile peso CLP= | 951.11 | 0.06 |
Colombia peso COP= | 4136 | -1.3 |
Peru sol PEN= | 3.7233 | 0.05 |
Argentina peso (interbank) ARS=RASL | 933 | -0.107181136 |
Argentina peso (parallel) ARSB= | 1375 | 0.363636364 |
Reporting by Lisa Mattackal and Shashwat Chauhan in Bengaluru; Editing by Alistair Bell and Nick Zieminski
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