March 9, 2020 / 7:11 PM / 25 days ago

EMERGING MARKETS-Latam assets crater after oil crash; coronavirus fears rise

    * Oil slides more than 30% 
    * Mexican peso set for its worst day in 3-1/2 years 
    * Currencies of Colombia, Brazil, Chile hit record lows
    * Brazil's Bovespa stock index drops as much as 10% 
    * Other stocks indexes in Latam slump between 3.6% and 10.5%

 (Adds comments, updates price action)
    By Shreyashi Sanyal and Susan Mathew
    March 9 (Reuters) - Mexico's peso was set for its worst day
in 3-1/2 years on Monday and Colombia's peso slumped to a record
low as the currencies of major oil exporters were hammered after
crude lost a third of its value. 
    Oil prices fell as much as 30% after Saudi Arabia slashed
its official crude selling price and set plans for a dramatic
increase in production following Russia's refusal to help
stabilize oil markets. The move shocked markets already reeling
under pressure from the coronavirus outbreak.
    "No one expected the Saudis to start a price war on oil, so
to that extent it is a black swan event," said Max Gokhman, head
of asset allocation at Pacific Life Fund Advisors in California.
    "It creates a snowball effect where momentum just
accelerates in whatever direction it was going. In this case it
was down."
    Brazil's real and the Chilean peso both sank 
to all-time lows. Brazil's central bank said it will continue
intervening in the foreign exchange market using all tools at
its disposal to whatever extent necessary to ensure the market
functions smoothly.
    Regional stocks plunged in line with a tumble on Wall
Street, with Brazil's Bovespa stock index sinking 10%,
triggering an automatic 15-minute halt. According to Eikon, the
index has fallen 34.5% year to date, logging the steepest losses
of any benchmark global index in dollar terms. 
    Preference shares of state oil firm Petroleo Brasileiro
 slid nearly 30% set for their worst day ever after
the company cut diesel and gasoline prices following the slump
in oil prices, a source said.
    The oil shock comes as the fast-spreading coronavirus has
been roiling markets for weeks, with the number of infected
cases exceeding 110,000 worldwide leading to the suspension of 
economic activity and adding to fears of a global recession. 
    Colombian oil major Ecopetrol dropped 17%, taking
Colombia's main index down 8.7% - on track for its
worst day since 2009, when the global financial crisis wreaked
havoc across markets. 
    The moves took MSCI's index of emerging market stocks
 down 6.1%, on track for its biggest percentage drop
since 2011.
    
    OIL EXPORTERS BEAR THE BRUNT
    The Mexican peso slipped as much as 8% to touch its
lowest since early 2017. Several analysts now say that chances
of an interest rate cut from the Mexican central bank might be
shrinking at the country's currency sinks to new lows.   
    Colombia's peso was set for its worst day ever, down
more than 6% to hit a new low of 3,835.
    "There is likely to be a hit to growth in Mexico and
Colombia. And weaker currencies in both countries will take
interest rate cuts off the table, at least in the near-term,"
said Quinn Markwith, emerging markets economist at Capital
Economics. 
    A scurry to the safety of bonds and the Japanese yen
quashed the dollar. Markets have fully priced in a
75-basis-point cut from the U.S. Federal Reserve later this
month, hot on the heels of a 50-point cut emergency cut last
week. 
    
    Key Latin American stock indexes and currencies at 1845 GMT:
    
  Stock indexes            Latest        Daily %
                                         change
 MSCI Emerging Markets        950.01          -6.13
                                      
 MSCI LatAm                  1997.79         -12.69
                                      
 Brazil Bovespa             86507.54         -11.72
                                      
 Mexico IPC                 39009.47          -5.75
                                      
 Chile IPSA                  4060.21             -4
                                      
 Argentina MerVal           31201.64        -11.415
                                      
 Colombia COLCAP             1352.46         -10.01
                                      
                                                   
      Currencies           Latest        Daily %
                                         change
 Brazil real                  4.7436          -2.32
                                      
 Mexico peso                 21.2310          -5.32
                                      
 Chile peso                    841.5          -1.82
                                      
 Colombia peso               3810.52          -5.94
                                      
 Peru sol                     3.5047          -1.00
                                      
 Argentina peso              62.5250          -0.07
 (interbank)                          
                                      
 

 (Reporting by Shreyashi Sanyal and Susan Mathew in Bengaluru;
Additional reporting by Uday Sampath Kumar; Editing by Dan
Grebler and Lisa Shumaker)
  
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