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EMERGING MARKETS-Latam FX weakens as dollar unfazed by jobs data; stocks edge up

By Ambar Warrick and Susan Mathew

* Fitch downgrades Colombia's credit rating * BofA expects Mexican economy to shrink 8% in 2020 * Dollar unfazed by unemployment data * Oil price spike helps Brazil's Petrobras (Adds analyst comment, updates prices) By Ambar Warrick and Susan Mathew April 2 (Reuters) - Latin American stocks made small gains on Thursday in a volatile session, while most regional currencies weakened as a swathe of weak economic readings increased safe-haven demand for the dollar. After dismal manufacturing data from around the globe had dented sentiment on Wednesday, a spike in weekly U.S. unemployment claims further outlined the economic impact of the coronavirus outbreak. With global infections now crossing the 1 million mark, a return to business as usual in the near term seems unlikely, with economic activity likely to contract further. Latam stocks rose about 1%, tracking some gains on Wall Street, while currencies fell 0.4%, with oil-sensitive players such as Mexico's peso and Colombia's peso failing to capitalize on a jump in oil prices. In fact, the weak reading furthered the rush for the dollar, which has been a sole beacon of stability amid a valuation rout that has battered everything between equities and treasury yields. Even though jobless claims topped estimates by a wide margin, some analysts say the market may have priced them in, while others say it is beyond comprehension. Analysts were also of the opinion that the U.S. numbers only heralded a further downturn in economic activity. "The data tsunami is coming, and this is only the beginning. We look for the USD to gain traction in the weeks ahead," TD Securities wrote in a note. Mexico's peso fell 0.5% after the finance ministry predicted a 3.9% contraction for the economy this year, while Bank of America forecast an 8% shrinkage due to fallout from the virus outbreak. Mexican stocks fell slightly. Brazil's real retreated slightly, while stocks jumped 1.9% on gains in state-owned oil and gas behemoth Petrobras. The stock surged in tandem with oil prices, which spiked on hopes of an end to the Saudi-Russian price war. Brazil continued attempts to shield its economy from impacts of the crisis with the Monetary Council authorizing the central bank to lend directly to banks using credit portfolios as collateral, while the government unveiled a $10 billion scheme to protect jobs. Colombian shares rose 3% after four sessions of losses, while the peso retreated. Fitch on Wednesday downgraded Colombia's credit rating, leaving it just a notch above junk, citing the likely economic weakening spurred by the pandemic. "Colombia still has one of the best outlooks for LATAM, but the risk at getting downgraded to junk is growing and that could scare away a lot of foreign investors," said Edward Moya, senior market analyst at OANDA, New York. Key Latin American stock indexes and currencies at 2056 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 837.72 1.26 MSCI LatAm 1529.10 1.42 Brazil Bovespa 72310.67 1.89 Mexico IPC 33464.71 -0.67 Chile IPSA 3559.25 4.03 Argentina MerVal 25803.27 1.891 Colombia COLCAP 1095.40 3.05 Currencies Latest Daily % change Brazil real 5.2623 -0.05 Mexico peso 24.3800 -0.73 Chile peso 858.8 0.28 Colombia peso 4024 1.52 Peru sol 3.4398 0.73 Argentina peso 64.7175 -0.29 (interbank) (Reporting by Ambar Warrick and Susan Mathew in Bengaluru Editing by Alistair Bell and Matthew Lewis)