By Asher Levine and Natsuko Waki
RIO DE JANEIRO/LONDON Feb 13 (Reuters) - Concerns over economic growth, corporate earnings and inflation drove Latin American stocks lower on Thursday, although most emerging market currencies gained against the dollar following disappointing U.S. retail data.
Yields on 10-year and 30-year U.S. bonds retreated from recent peaks, relieving pressure on South Africa's rand, the Turkish lira and the Hungarian forint, some of the worst-hit currencies in the sell-off that began last month. Nigeria's currency also rebounded after a central bank intervention.
U.S. retail sales fell unexpectedly in January, signaling slowing economic growth and raising the outlook among some investors for a slower reduction in the Federal Reserve's monetary stimulus program.
While some traders attributed the afternoon's broad strengthening of emerging market currencies to the weak figures, others saw a technical correction after recent losses, considering the impact of inclement weather on the U.S. data.
"A weak quarter, especially one for which the data is not particularly clean, will not alter the Fed's medium-term views of the underlying economy or the risk-reward of (monetary stimulus)," wrote Brown Brothers Harriman analysts in a note.
All of Latin America's major currencies strengthened against the dollar, with Brazil's real up over 1 percent and Mexico's peso rising 0.2 percent. Chile's peso also gained as companies, mostly mining firms, sold dollars on the local market.
The region's stocks fared worse, with MSCI's Latin American stock index down 0.3 percent.
A plunge in Banco do Brasil SA shares helped drag Brazilian stocks down. The state-run lender posted worse-than-expected quarterly earnings and signalled a possible slowdown in lending this year.
Weaker-than-expected retail sales also sapped appetite for Brazilian equities, which have been battered over the past year on concerns over slow economic growth and higher interest rates.
"Some calculations now suggest gross domestic product could fall into negative territory in the fourth quarter, something that was (previously) out of the question," said Gustavo Mendonça, an economist with Saga Capital in Rio de Janeiro.
Citigroup analysts Marcelo Kfoury and Leonardo Porto on Thursday cut their outlook for Brazilian economic growth in 2014 to 1.3 percent from 1.8 percent previously.
Mexican shares also dropped, following weak earnings from conglomerate Alfa.
In Europe, concerns continued to grow over how Ukraine can prop up its currency and pay off its debt. Russia suspended a $15 billion bailout after Ukrainian President Viktor Yanukovich sacked his prime minister late last month.
"Ukraine is on the knife-edge of solvency risk," said Gabriel Sterne, an economist at broker Exotix.
The Ukrainian central bank brought in temporary currency controls last week after the hryvnia fell below 9 per dollar for the first time in five years. The bank said on Thursday controls may last longer than two weeks, as the currency continued to fall.
Investors were not convinced the central bank could continue to defend the hryvnia. The currency weakened further on Thursday, losing 1.5 percent against the dollar.
Hungary's forint fell 0.4 percent against the euro , though strengthened against the dollar.
Investors are watching inflation data due Friday for clues on whether rates will be cut again next week. Hungary's benchmark rate is already at a record-low 2.85 percent.
Elsewhere, the Nigerian naira rebounded from a two-year low against the dollar after the central bank sold an undisclosed amount of hard currency to lenders to shore up the currency. Nigerian stocks and bonds got hammered earlier in the session as investors sold off frontier-market assets.
Africa's second-largest economy and biggest oil producer has been a top frontier-market investment in recent years. But political instability is a concern before upcoming elections, and the central bank has tightened reserve requirements.
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