By Asher Levine and Natsuko Waki
RIO DE JANEIRO/LONDON Feb 13 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
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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For TURKISH market report, see
For RUSSIAN market report, see