February 6, 2019 / 10:09 PM / 11 days ago

EMERGING MARKETS-Latam stocks drop as Brazil traders cash out some chips

 (Recasts throughout, updates prices, adds trader's quote)
    By Aaron Saldanha
    Feb 6 (Reuters) - Latin American stocks dropped like a stone
on Wednesday, punished by a 3.7 percent tumble in Brazilian
shares, while currencies in the region broadly softened against
a robust dollar.
    Investors in Latin America's top economy scaled back bets
across asset classes, with the effect seen most clearly on
banking stocks, as signs emerged the path to much-anticipated
pension reform may not be traversed as quickly as hoped. 
    A spokesman for President Jair Bolsonaro, who is recovering
in hospital from a follow-up procedure after being stabbed on
the campaign trail last year, said analysis of pension reform
proposals will depend on the right-wing politician's health.

    A local trader said the prospect of a delay in the pension
overhaul approval process was enough for traders to lock in some
profits made during a strong start to 2019. The benchmark had
gained about 11.9 percent in the year through Tuesday.
    MSCI's Latin American stocks index fell 3.1
percent in its worst one-day showing in nearly two months. Its
index of Latin American currencies shed 0.4
percent, weighed down by a 0.8 percent slide in Brazil's real
.    
    Sao Paulo-traded stocks saw their worst day in more
than eight months, clocking a 3.7 percent loss as they distanced
themselves further from Monday's record closing high. 
    A generally positive report by ratings agency Moody's on the
future of Brazil's state banks was insufficient to stop lender
Banco do Brasil from being swept up in the
broad-based carnage as it shed 6.1 percent.
    Mining giant Vale SA dropped 4.9 percent after
the state of Minas Gerais suspended the operational license of
the Jangada mine, the firm said in a filing.

    The suspension piles more misery on Vale, coming on the
heels of the miner declaring force majeure on some contracts on
Tuesday in the wake of a deadly dam burst at a mine last month.

    Brazil's central bank's monetary policy committee voted
unanimously to leave borrowing costs at a record low 6.5
percent, as predicted by all 28 economists in a Reuters poll,
and signaled relatively muted inflationary pressures could keep
rates where they are for some time.
    Yields on local 10-year Brazilian bonds jumped
to pierce the 9 percent mark during trade then retreated
marginally to trade around 8.93 percent. 
    The profit-taking trend spilled over into neighbouring
Argentina, where stocks fell 2 percent to snap a
seven-session winning run. The peso weakened the most in
a little over a week.
    Mexican stocks fell 1.1 percent, with every materials
stock on the index declining.
    The country's mining undersecretary said the government has
more than 5,000 mining concessions under review that could be
canceled in case anomalies are found.
    The Mexican peso dipped 0.2 percent, a day ahead of a
central bank rate meeting. 
    Christian Lawrence, a senior market strategist with
Rabobank, said in a note he expects the policy rate to remain at
8.25 percent, despite overnight index swaps pricing in a 27
percent chance of a 25-basis point hike.            
     
    Key Latin American stock indexes and currencies at 2134 GMT
    
 Stock indexes                                   daily
                                                     %
                                      Latest    change
 MSCI Emerging Markets                 1048.46   -0.33
 MSCI LatAm                            2867.88   -3.07
 Brazil Bovespa                       94635.57   -3.74
 Mexico IPC                           43855.79   -1.09
 Chile IPSA                            5426.51   -0.73
 Argentina MerVal                     36731.67   -1.97
 Colombia IGBC                        12071.73   -0.43
                                                      
 Currencies                                      daily
                                                     %
                                                change
                                        Latest  
 Brazil real                            3.6985    0.15
 Mexico peso                           19.0707   -0.22
 Chile peso                             654.45   -0.53
 Colombia peso                            3104    0.10
 Peru sol                                 3.32    0.12
 Argentina peso (interbank)            37.5200   -0.77
                                                
 
 (Reporting by Aaron Saldanha in Bengaluru and Paula Arend Laier
in Sao Paulo
Editing by James Dalgleish)
  
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