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EMERGING MARKETS-Most Latam stocks fall as U.S.-China trade optimism fades

By Susan Mathew

(Updates prices) By Susan Mathew July 2 (Reuters) - Most Latin American stocks fell on Tuesday, tracking a pause in Wall Street's rally as optimism around U.S.-China trade talks subsided, with worries about economic growth and a drop in miner Vale additionally pressuring Brazil shares. Following a risk-on day on spurred by the United States and China agreeing to return to the negotiating table, most regional shares lost between 0.1% and 1%. U.S. stocks lost momentum after as investors turned skeptical about a U.S.-China trade deal after U.S. President Donald Trump on Tuesday said any trade deal with China would need to be "somewhat tilted" in favour of the United States. Washington's threats to impose tariffs on an additional $4 billion of goods from the European Union also weighed sentiment. Brazil shares slid 1% and the currency fell 0.2% against a weaker dollar on sluggish economic growth outlook. Central bank chief Roberto Campos Neto said risks to domestic growth from a global slowdown may be greater than previously thought, and reiterated that economic recovery will be gradual. Meanwhile, Brazil's industrial output data showed some longer-term trends still point to an underperforming sector. This followed a warning from the economy ministry on Monday that trade activity will decline due to slowing global economic growth. "We remain sceptical about a sustained rebound in gross fixed capital formation this year, as business confidence still struggles and as key macro reforms move slowly in Congress," wrote Mauricio Oreng, senior Brazil strategist at Rabobank in a note. "We only expected a U-turn in private capital spending for 2020," he wrote. Iron ore miner Vale's shares slumped 4.4% after a Brazilian Senate committee investigating a deadly dam collapse in January, said Vale's chief financial officer and its former chief executive should both be indicted for manslaughter. In Mexico, the peso firmed 0.3%, and decline on the stock index were capped after Trump took tariffs against Mexican imports off the table after the country stepped up efforts to stem migrant flows from Central America to the United States. Argentine assets outperformed, with shares up 0.9%, while the peso extended gains a day after the central bank set a new lower interest rate floor on its benchmark "Leliq" notes for July, a rate it has been bringing down from sky-high levels last year. "We think that the current move implies a more cautious approach from policy-makers, in an effort to preserve ARS stability," said Morgan Stanley analysts in a note. "The current environment benefits high yielders and we think that ARS should stay supported." Key Latin American stock indexes and currencies at 1937 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 1063.59 -0.05 MSCI LatAm 2833.17 -1.18 Brazil Bovespa 100505.51 -0.99 Mexico IPC 43385.36 -0.12 Chile IPSA 5033.64 -0.58 Argentina MerVal 41898.39 0.94 Colombia IGBC 12546.22 -0.48 Currencies Latest Daily % change Brazil real 3.8473 -0.12 Mexico peso 19.0616 0.28 Chile peso 680.3 -0.10 Colombia peso 3208.45 -0.22 Peru sol 3.294 -0.15 Argentina peso 42.1500 0.52 (interbank) (Reporting by Susan Mathew in Bengaluru; Editing by Lisa Shumaker)