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EMERGING MARKETS-Latam currencies slide on COVID-19 vaccine worries

Shreyashi Sanyal
·3 mins read

* Brazil real biggest decliner among Latam peers * Mexican peso falls for second straight day * IMF sees worsening outlook for many emerging markets * Brazilian e-commerce stocks lift Bovespa index (Updates prices throughout; adds bullets, comments) By Shreyashi Sanyal Oct 13 (Reuters) - Latin American currencies fell on Tuesday as global risk sentiment took a hit from Johnson & Johnson's move to pause its COVID-19 vaccine trials and on a worsening emerging market growth outlook from the International Monetary Fund. U.S. healthcare conglomerate J&J paused clinical trials of its coronavirus vaccine candidate due to an unexplained illness in a study participant, delaying one of the highest profile efforts to contain the global pandemic. "Though a pause in a trial – this time due to 'an unexplained illness in a study participant' – isn't exactly out of the ordinary, it still dealt a blow to the market's faint, naive hopes of a vaccine arriving this side of Christmas," said Connor Campbell, financial analyst at Spreadex in London. Brazil's real led declines among currencies in Latin America, down about 1% as markets reopened following a public holiday on Monday. Concerns about public finances in Latin America's biggest economy lingered, with rising doubts if Brazil can finance its new fiscal program without breaking the government's spending cap. The Mexican peso fell for the second straight day, weakening 0.7%, while stocks in the region dropped 0.4%. The IMF said on Tuesday emerging markets other than China will see a 2020 contraction of 5.7%, worse than the 5.0% predicted in June. Strategists at UBS expect an emerging markets recovery to be dependent on "successful development and distribution of COVID-19 vaccines, continued monetary and fiscal accommodation worldwide, and an uptrend in commodity prices." Emerging markets will be sensitive to news around the Nov. 3 U.S. presidential election, with analysts citing a Democratic victory as the most favorable outcome for EM currencies. A stronger dollar on the day also knocked down Latin American countries, with Colombia's peso falling 0.8% and the Chilean peso weakening 0.2%. The MSCI's index for Latin American equities fell 0.3%, with Brazil's Bovespa bucking the downward trend to rise 0.8%. Brazilian e-commerce companies including B2W, Via Varejo and Magazine Luiza gained between 2% and 7%, rising the most among Sao Paulo stocks. Amazon.com Inc on Tuesday rolled out its Prime Day event in Mexico and for the first time in Brazil, but the world's biggest online retailer has been struggling to keep up with local rivals. In other parts of South America, Venezuela is ramping up its production and export of coal to European nations, according to export figures and vessel tracking data, as it seeks new sources of foreign currency amid tightening U.S. sanctions aimed at toppling President Nicolas Maduro. Key Latin American stock indexes and currencies at 1933 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 1136.35 -0.07 MSCI LatAm 1912.94 -0.33 Brazil Bovespa 98259.50 0.8 Mexico IPC 38181.54 -0.42 Chile IPSA 3655.14 -0.61 Argentina MerVal 46007.18 0.329 Colombia COLCAP 1166.87 -1.94 Currencies Latest Daily % change Brazil real 5.5739 -0.86 Mexico peso 21.3563 -0.61 Chile peso 797.6 -0.01 Colombia peso 3860 -0.95 Peru sol 3.5907 -0.14 Argentina peso (interbank) 77.4000 -0.32 Argentina peso (parallel) 162 3.09 (Reporting by Shreyashi Sanyal in Bengaluru; Editing by David Gregorio and Richard Chang)