March 16, 2020 / 6:55 PM / in 15 days

EMERGING MARKETS-Latam FX caught in virus-driven rout; Chile central bank cuts rates

    * Chilean central bank slashes interest rates to 1%
    * U.S. Fed's emergency rate cut spooks markets
    * Brazil unveils economic measures to support economy
    * UBS calls for immediate 100 bps cut by Brazil central bank
    * LATAM Airlines Group to cancel 90% of international
flights

 (Adds comments, updates prices)
    By Shreyashi Sanyal
    March 16 (Reuters) - Markets pummeled currencies in Latin
America on Monday as the U.S. Federal Reserve and the Chilean
central bank's moves to slash interest rates did little to ease
worries about the impact of the coronavirus pandemic on the
global economy. 
    The Mexican peso sank as much as 5.2%, hitting new
lows as oil prices tumbled, while Brazil's real fell
2.6%.   
    Regional stocks also slumped, in line with global markets.
Brazil shares gave up as much as 14.3%, while those in
Chile, Argentina and Colombia lost between 8% and 12.7%.

    The Fed cut interest rates by 100 basis points to near zero
and pledged to expand its balance sheet by at least $700 billion
in the coming weeks. 
    "Lowering borrowing costs probably won't make a big
difference until we move toward recovery and business investment
starts to pick up," said Burt White, chief investment officer at
LPL Financial. 
    Chile's central bank said it would cut its interest rate to
1% from 1.75%. The rate is the lowest in almost a decade, last
reaching 1% in June 2010.
    "Although today's statement didn't say that further cuts are
on the cards, we find it likely that more easing will follow,
taking the policy rate back to around 0.5%," said William
Jackson, chief emerging markets economist at Capital Economics. 
    As oil prices slid, with Brent falling 10% and U.S. crude to
below $30, investors worried about the impact of the slide on
Mexican state-run oil firm Pemex.
    With debt of more than $100 billion, Pemex is Latam's most
indebted company and reported one of its worst-ever losses last
year. After rating agency Fitch downgraded the company's bonds
to junk last year, it faces the threat of similar action from
S&P and Moody's, which would spark an exodus from Pemex bonds by
funds that are mandated to hold investment-grade bonds.
    Mexican stocks were shut for a local holiday.  
    Brazil's real hovered near record lows. The government on
Monday approved a raft of measures to combat the economic and
financial damage from the coronavirus, boosting liquidity in the
financial system, maintaining the flow of credit in the economy
and expanding banks' lending capacity.
    Economists at Swiss investment bank UBS on Monday called for
an "immediate" 100 basis-point cut in Brazil's benchmark Selic
interest rate, to 3.25%. A central bank survey showed the
outlook for Brazil's economy deteriorated sharply.

    Sao Paulo's Bovespa index triggered a circuit break
after it fell 10% and went on to steeper losses after it
restarted.
    LATAM Airlines Group tumbled 24% as the continent's
largest carrier canceled 90% of its international flights as
demand collapsed and countries shut down borders due to the
coronavirus outbreak.
    Key Latin American stock indexes and currencies at 1843 GMT:
 Stock                            Latest   Daily % change
   indexes                                 
 MSCI Emerging Markets            833.97   -6.42
                                           
 MSCI LatAm                       1641.38  -13
                                           
 Brazil Bovespa                   72048.4  -12.86
                                  2        
 Mexico IPC                       38085.0  3.95
                                  5        
 Chile IPSA                       3292.89  -12.51
 Argentina MerVal                 25911.7  -8.915
                                  9        
 Colombia COLCAP                  1020.10  -13.13
                                           
 Currencies                       Latest   Daily % change
 Brazil real                      4.9955   -3.72
 Mexico peso                      22.7920  -3.90
 Chile peso                       854.5    -1.91
 Colombia peso                    4078     -1.40
                                           
 Peru sol                         3.5518   -0.90
 Argentina peso (interbank)       63.0300  -0.21
                                           
    
    
    

 (Reporting by Shreyashi Sanyal and Susan Mathew in Bengaluru;
Editing by Dan Grebler)
  
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