June 18, 2020 / 7:51 PM / 25 days ago

EMERGING MARKETS-Mexican peso slumps after U.S. sanctions, other Latam FX slide

    * U.S. sanctions Mexican firms over links to Venezuela
    * Brazil central bank hints at further easing
    * Brazil April economic activity plummets
    * Argentina's peso at new low as debt talks stall
    * Colombian economy shrinks 20% in April 

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    By Susan Mathew and Ambar Warrick
    June 18 (Reuters) - Mexico's peso slumped 2% on Thursday
after the United States sanctioned Mexican firms over links to
Venezuela, while most other Latin American currencies slid as
economic data underscored the damage wrought by the novel
coronavirus pandemic. 
    Mexico's peso deepened session losses after
Washington on Thursday imposed sanctions on Mexican companies
and individuals and two oil tankers under a program meant to
pressure the government of Venezuelan President Nicolas Maduro.

    Meanwhile, Mexico's finance minister said the pandemic has
likely triggered Mexico's deepest economic contraction since the
Great Depression. 
    Mexican stocks were down 0.6%.
    Brazil's real weakened 2.3%, with data showing
economic activity in the country slumped at a record pace in
April to a 14-year low.  
    Overnight, the central bank reduced Brazil's benchmark
interest rate further into record-low territory while indicating
that there was still some room for further "residual" trimming
to tide the economy through the coronavirus.
    A growing number of analysts say the economic reality will
force the bank's hand. This could spell more real
weakness, given that record-low rates have already made it a
less-lucrative investment destination.
    Brazilian stocks rose about 0.3%, lifted by
financials and energy stocks, and outperformed world stocks
, which were rattled by spiking COVID-19 cases in
the United States and China, while data showed that U.S. jobless
claims remained elevated.
    "Global equities will struggle to improve upon recent gains
on a debatable V-shaped economic recovery, rising COVID-19
cases" and a wealth of geopolitical risks, said Edward Moya,
senior market analyst at OANDA, New York.
    But Latin America equities could offset these losses through
ongoing policy support and further economic recovery in the
world's largest economies, said Oliver Jones, a senior markets
economist at Capital Economics. 
    Chilean stocks were flat, while the peso
sank 2%.
    Colombia's peso was an outlier, up 0.3%, tracking a
recovery in oil prices as a panel of OPEC and its allies met to
review record oil supply cuts.
    But gains were limited as data showed coronavirus lockdowns
squeezed Colombia's economy, contracting 20.06% in April versus
the same month last year - its largest fall on record.

    Argentina's peso weakened to a record low and stocks
sank 5.4% as the country's debt restructuring talks hit a
roadblock, with the government determined not to cede further
ground after making an improved offer and a key creditor group
warning that negotiations had failed.
    Key Latin American stock indexes and currencies 1929 GMT:
  Stock indexes           Latest   Daily %
 MSCI Emerging Markets     993.48    -0.11
 MSCI LatAm               1913.23    -2.12
 Brazil Bovespa          96055.66     0.53
 Mexico IPC              37682.03    -0.57
 Chile IPSA               3994.74    -0.05
 Argentina MerVal        38258.19   -5.468
 Colombia COLCAP          1140.43      0.1
      Currencies          Latest   Daily %
 Brazil real               5.3820    -2.28
 Mexico peso              22.7747    -2.08
 Chile peso                 815.8    -2.35
 Colombia peso            3749.48    -0.26
 Peru sol                  3.5207    -0.68
 Argentina peso           69.7300    -0.07
 (Reporting by Ambar Warrick in Bengaluru; Editing by Dan
Grebler and Jonathan Oatis)
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