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EMERGING MARKETS-Latam assets fall on spike in virus cases, dour growth forecast

Shreyashi Sanyal
·2 mins read

By Shreyashi Sanyal June 24 (Reuters) - Latin American currencies and stocks fell on Wednesday, as coronavirus infections continued to climb at an alarming pace in the region, with investors scurrying for safety after downbeat economic forecasts for major regional countries. The death toll from COVID-19 surpassed 100,000 in Latin America on Tuesday, according to a Reuters tally, with few signs of the outbreak easing. The International Monetary Fund slashed its 2020 global output forecasts further as it now expects global output to shrink by 4.9%, compared with a 3.0% contraction predicted in April. Latin American economies saw some of the biggest downgrades, with Brazil's economy now seen shrinking 9.1% and Mexico's 10.5% and Argentina's 9.9% in 2020. The MSCI's index of Latin American currencies fell 0.9% and is already down 17% this year, while its stocks counterpart is down about 33%, despite double digit percentage recoveries since year-lows. The Brazilian real slipped 1.5%, the most among regional peers. The Brazilian central bank said Brazil posted a current account surplus for the third month in a row in May and foreign direct investment rebounded slightly and the outflow from stocks and bonds slowed further from the record sell-off in March. The Mexican peso declined 0.5%, with local investors eying a central bank policy meeting on Thursday where it is expected to cut interest rates by another 50 basis points to 5.00%. Data showed Mexican consumer prices rose 0.32% during the first half of June, a figure unlikely to deter policymakers from slashing rates. "The CPI print may cause Banxico hawks to be more cautious, but not enough to derail the easing cycle," analysts at Citi wrote in a note. "The virus situation in Mexico is grave, with the government unwilling to alter course or policies, and with a significant downward bias for activity and prospects." Other regional currencies traded lower against a stronger U.S. dollar. Stocks in the regions also slipped, tracking a weaker open on Wall Street. Among others, MSCI Inc, the world's largest index provider, warned on Tuesday that the MSCI Argentina Index could be removed from the MSCI Emerging Markets Index if it became harder for foreign investors to access its stock market. Key Latin American stock indexes and currencies at 1424 GMT Stock indexes Latest Daily % change MSCI Emerging Markets 1012.28 -0.23 MSCI LatAm 1945.30 -1.71 Brazil Bovespa 95000.41 -1.02 Mexico IPC 37888.72 -0.86 Chile IPSA 4011.95 -0.49 Argentina MerVal 40468.41 -0.821 Colombia COLCAP 1132.03 -0.98 Currencies Latest Daily % change Brazil real 5.2322 -1.54 Mexico peso 22.5200 -0.50 Chile peso 820 -0.21 Colombia peso 3713 -0.39 Peru sol 3.5337 -0.34 Argentina peso 70.0900 -0.07 (interbank) (Reporting by Shreyashi Sanyal in Bengaluru; Editing by Bernadette Baum)