EMERGING MARKETS-Latam stocks fall on weak Chinese trade data

Thu Apr 10, 2014 1:27pm EDT

By Walter Brandimarte
    RIO DE JANEIRO, April 10 (Reuters) - Latin American stocks
dropped on Thursday after weak Chinese trade data raised concern
about demand for the region's commodity exports, although a
rebound in copper imports by China boosted the Chilean peso.
    Benchmark stock indexes in Brazil, Mexico and
Chile  fell 0.3 percent or more after data showed
China's import growth slowed sharply in March while its exports
unexpectedly fell for the second straight month. 
    "The data reinforces the market sentiment that China
continues to slow down, which may have negative impact on other
emerging economies," analysts with Brazil's BB Investimentos
wrote in a research note.
    Shares of Brazil's mining company Vale SA slid
1.2 percent as investors feared the impact of lower Chinese
demand for the company's iron ore exports.
    In foreign exchange markets, the Mexican peso 
weakened 0.3 percent after data showed the number of Americans
filing for unemployment benefits tumbled last week to the lowest
level in nearly seven years. 
    The number suggested U.S. policymakers may move faster than
expected in removing monetary stimulus measures that have long
supported appetite for risk in emerging markets. 
    The Mexican peso was particularly vulnerable to losses after
Wednesday data showed local inflation fell below the central
bank's 4 percent limit in March, allowing policymakers to keep
interest rates at record lows. 
    
    BRAZIL TO END TIGHTENING CYCLE?
    While Mexico keeps interest rates steady to fuel an economic
recovery, Brazil last week increased its benchmark Selic rate to
11 percent to fight stubborn inflation. 
    Minutes of the Brazilian central bank's monetary policy
meeting released on Thursday signaled the country's year-long
monetary tightening cycle may be coming to an end, but still
left the door open for one more rate increase. 
    The minutes caused short-dated interest-rate futures in
Brazil to fall, while long-dated contracts rose on the view that
inflation will remain a problem in the long run.
    The minutes also supported gains in Brazil's exchange rate.
The real  strengthened 0.3 percent to 2.1881 per
dollar as investors suspected that, rather than raising the
Selic much higher this year, the central bank will resort to a
stronger currency to curb inflation pressures.
    "Of course, the central bank has shifted to using the
exchange rate as a tool to fight inflation," Kenneth Lam, Citi's
strategist for Latin America, wrote in a note to clients.
    "Granted that they face near-term pressures from food
prices, exchange rate is arguably more effective than rates to
prevent inflation from breaching the all-important 6.5 percent
level before the elections in October," he added.
    Even as China's trade data weakened in general, its copper
imports rose more than 10 percent in March from February,
driving higher the metal's price and the Chilean peso.
    The currency jumped 1.1 percent following a 0.6 percent rise
in the price of copper, Chile's main export product.

    
     
    Key Latin American stock indexes and currencies at 1700 GMT:
    
     Stock indexes               daily %     YTD %
                      Latest     change      change
 MSCI Emerging      1022.24      0.73        1.21
 Markets                                     
 MSCI LatAm         3285.68      0.5         2.14
                                             
                                             
 Brazil Bovespa     51020.27     -0.32       -0.95
                                             
 Mexico IPC         40697.65     -0.59       -4.75
                                             
 Chile IPSA         3843.11      -0.54       3.89
                                             
 Chile IGPA         18829.49     -0.45       3.31
                                             
 Argentina MerVal   6508.08      0.49        20.72
                                             
 Colombia IGBC      13793.71     0.32        5.53
                                             
 Peru IGRA          14777.49     1.4         -6.20
                                             
 Venezuela IBC      2519.88      -0.25       -7.92
                                             
                                             
 Currencies                      daily %     YTD %
                                 change      change
                    Latest                   
 Brazil real        2.1896       0.32        7.64
                                             
 Mexico peso        13.0252      -0.36       0.04
                                             
 Chile peso         543.9        1.12        -3.27
                                             
 Colombia peso      1917.25      0.56        0.77
                                             
 Peru sol           2.783        0.25        0.36
                                             
 Argentina peso     8.0000       0.03        -18.84
 (interbank)                                 
                                             
 Argentina peso     10.33        0.10        -3.19
 (parallel)                                  
                                             
    

 (Additional reporting by Priscila Jordao in Sao Paulo; Editing
by Grant McCool)
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