EMERGING MARKETS-Latam markets drop as Ukraine concerns return
By Walter Brandimarte RIO DE JANEIRO, March 13 (Reuters) - 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 multi-year lows. 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 Markets 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:-------------------------------------------------------------->
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