By Walter Brandimarte
RIO DE JANEIRO, March 13 Latin American stocks
and currencies fell on Thursday afternoon as Russia launched new
military exercises near its border with Ukraine, rekindling
geopolitical fears that eclipsed earlier market optimism fueled
by encouraging U.S. economic data.
The Latin American portion of MSCI's benchmark stock index
fell 1 percent as fear of a possible war in the
region mounted, with German Chancellor Angela Merkel warning of
"catastrophe" unless Russia changes course.
Earlier in the session, the MSCI Latin America index gained
more than 1 percent on the back of data showing the number of
Americans filing new claims for unemployment benefits
unexpectedly fell last week, while U.S. retail sales rose more
than expected in February.
"After starting the day with a little more appetite for
risk, markets became fearful again," said Caio Sasaki, an
analyst with XP Investimentos in São Paulo.
Also weighing on investor sentiment was concern that an
economic slowdown in China would further hurt demand for Latin
America's commodities export. Fears about the Chinese economy
were on the rise after a string of data showed growth in
investment, retail sales and factory output all fell to
Brazil's benchmark Bovespa index dropped 1 percent,
erasing early gains of as much as 0.7 percent. Its losses were
cushioned, however, by the positive performance of power
utilities such as Cia Energética de Minas Gerais SA, also known
as Cemig, whose shares climbed nearly 1 percent.
Stocks of Brazil's power sector companies rose on reports
that the government will announce later on Thursday plans to
refund power distributors for sky-rocketing energy prices.
Mexico's IPC stock index slid 1.5 percent as
investors, focusing on a sell-off on Wall Street, largely
shrugged off a report showing domestic industrial production
rebounded more than expected in January.
In foreign exchange markets, most Latin American currencies
erased early gains and weakened, reflecting a rise in investors'
aversion to risk.
The Brazilian real lost 0.3 percent even as data
showed an unexpected rise in the country's retail sales in
January. The numbers reinforced expectations that the central
bank will keep raising interest rates to curb inflation, which
could add to the allure of the currency.
Chile's peso ended little changed at 572.30 per
dollar, not too far from its lowest level in nearly five years
which it hit earlier this week.
Analysts warned the peso was poised to weaken further as
Chile's central bank is expected to cut interest rates by 25
basis points later on Thursday. Chilean policymakers have
already reduced the country's base interest rate by 75 basis
points since October as the economy faltered.
"The deterioration in economic activity trends along with
the rate-cutting cycle are two factors that are likely to
continue to weigh on the Chilean peso," ING strategists said in
a research note.
Key Latin American stock indexes and currencies at 1900 GMT:
Stock indexes daily % YTD %
Latest change change
MSCI Emerging 941.82 -0.3 -5.79
MSCI LatAm 2841.14 -1.04 -10.3
Brazil Bovespa 45417.73 -0.97 -11.82
Mexico IPC 38063.37 -1.48 -10.92
Chile IPSA 3612.62 -0.29 -2.34
Chile IGPA 17895.52 -0.31 -1.82
Argentina MerVal 5670.02 -0.75 5.18
Colombia IGBC 13029.48 1.13 -0.32
Peru IGRA 15027.04 -0.85 -4.61
Venezuela IBC 2639.33 -0.42 -3.55
Currencies daily % YTD %
Latest change change
Brazil real 2.3627 -0.19 -0.25
Mexico peso 13.2707 -0.22 -1.81
Chile peso 572.3 -0.02 -8.07
Colombia peso 2048.4 -0.11 -5.68
Peru sol 2.802 -0.04 -0.32
Argentina peso 7.8875 -0.13 -17.69
Argentina peso 10.95 -0.73 -8.68
GRAPHIC on emerging market FX performance 2014:GRAPHIC on MSCI emerging index performance 2014:-------------------------------------------------------------->