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EMERGING MARKETS-Latam FX hit new lows, Brazil stocks set for worst day in over 21 years

By Shreyashi Sanyal
·3 min read
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* Mexican, Colombian, Chilean pesos at record lows * Brazil's Bovespa index set for worst day since Oct. 1998 * Azul dives as it cuts international flights (Adds comment, updates prices) By Shreyashi Sanyal March 12 (Reuters) - Most Latin American currencies touched historic lows on Thursday and regional stocks nosedived after Washington's unexpected curb on travel from Europe heightened fears that the coronavirus pandemic would slam global growth. U.S. President Donald Trump on Thursday announced the sweeping restrictions and economic steps to counter the pandemic's impact, but the scant details disappointed investors. "Instead of providing urgently required reassurance to already terrified markets that his administration is capable of dealing with the coronavirus, President Trump gave a speech that reignited selling pressure across global stocks," said Piotr Matys, senior emerging markets FX strategist at Rabobank. MSCI's index for Latin American equities tumbled 13.3%, while its index for currencies shed 2.4%. Investors scrambled for the greenback as swap spreads on major currencies blew out and the euro dropped after the European Central Bank announced more stimulus to fight the coronavirus impact but kept rates unchanged. As oil prices slid, crude exporter Mexico's peso fell as much as 6.9% to an all-time low of 22.86 to the dollar, while Colombia's currency gave up 4.6% to hit a new low of 4,066.13. Mexico's central bank said it would hold $500 million of auctions as part of its currency hedging program on Thursday, April 16; Friday, April 17; Wednesday, May 13; and Wednesday, June 10. Brazil's real breached 5 to the dollar for the first time. The central bank announced an auction of $2.5 billion in the spot market. "It's worth mentioning that the (Brazilian) central bank still has ample instruments to intervene in the FX market with international reserves amounting $362 billion at the end of Feb. 20," said EM strategists at Citi Research in a note. As copper prices fell to three-year lows, the currency of the world's largest copper producer, Chile, dropped 1.2% to an all-time low. Brazil's stock market was halted twice as its shares slumped as much as 19.6%, bringing the year's losses to 47.5% in dollar terms. Sao Paulo stocks were set for their worst day since 1998. Miner Vale shed 14%, while preferred shares of state oil firm Petróleo Brasileiro S.A., or Petrobras , tumbled 21%. Carrier Azul dove 28% after it became the first Latin American carrier to implement a hiring freeze and put some workers on unpaid leave as demand slumped. LATAM Airlines followed suit, saying it would cut capacity on international flights by up to 30%, sending its shares down 17%. Chile's main stock index fell 5.9% to a four-year low. Mexican stocks slid 4.4% to their lowest in more than eight years, while Colombia's COLCAP index slid 8.2% as oil firm Ecopetrol dived almost 11%. Key Latin American stock indexes and currencies at 1850 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 885.18 -6.49 MSCI LatAm 1716.60 -13.25 Brazil Bovespa 73175.65 -14.08 Mexico IPC 37207.86 -3.8 Chile IPSA 3742.79 -5.95 Argentina MerVal 28705.20 -8.639 Colombia COLCAP 1190.27 -8.12 Currencies Latest Daily % change Brazil real 4.8550 -2.78 Mexico peso 21.6110 -1.07 Chile peso 853.8 -2.16 Colombia peso 4026 -3.42 Peru sol 3.5267 -0.28 Argentina peso 62.8175 -0.23 (interbank) (Reporting by Shreyashi Sanyal and Susan Mathew in Bengaluru Editing by Frances Kerry and Richard Chang)