EMERGING MARKETS-Latam stocks and currencies slump on global growth concerns
By Bruno Federowski SAO PAULO, April 7 (Reuters) - Latin American stocks and currencies slumped on Thursday as worries over global economic weakness drove investors away from risky assets. Major central banks including the U.S. Federal Reserve and the European Central Bank flagged signs of tepid growth abroad this week. Their willingness to take policy action has done little to offset the concerns. This has led many traders to unwind trades seeking to benefit from wide interest rate spreads. The Japanese yen , a common source of funding for transactions known as carry trades, hit a 17-month high against the U.S. dollar on Thursday. Local political issues were also a key driver as the Peruvian sol weakened for a fifth consecutive session ahead of general elections on Sunday. The rise of leftist candidate Veronika Mendoza in opinion polls and promises of "radical change" displeased many traders, driving the sol to underperfom. She is polling head-to-head against investor-favorite Pedro Pablo Kuczynski for second place behind Keiko Fujimori. Fujimori is not expected to secure a more than 50 percent majority, which would prolong the presidential race until a second-round vote. Strategists with Bank of America Merrill Lynch recommend clients sell the Peruvian sol, aiming at a rate of 3.55 per U.S. dollar. The currency is currently trading near 3.40 to dollar. "Given the wide differences in economic policy proposals by Kuczynsky and Mendoza, coupled with poll results showing that the second round election would likely be competitive, uncertainty about the direction of economic policy in the next administration will likely increase," they wrote. Brazil's benchmark Bovespa index bucked the bearish trend, supported by financial shares. Local media on Thursday reported that executives testified that President Dilma Rousseff's 2014 re-election campaign was partly funded by kickbacks from large infrastruction progress. The allegations could bolster the case for fresh elections, a move that many traders believe could help restore investor trust in the economy. Key Latin American stock indexes and currencies at 1600 GMT: Stock indexes daily % YTD % change change Latest MSCI Emerging Markets 808.43 -0.07 1.87 MSCI LatAm 2033.10 -0.63 11.81 Brazil Bovespa 48584.19 1.01 12.07 Mexico IPC 44894.61 -0.86 4.46 Chile IPSA 3867.84 -0.4 5.10 Chile IGPA 19002.74 -0.35 4.69 Argentina MerVal 11916.29 -2.81 2.07 Colombia IGBC 9703.30 -0.76 13.52 Venezuela IBC 15134.93 0.55 3.75 Currencies daily % YTD % change change Latest Brazil real 3.6985 -1.47 6.72 Mexico peso 17.8900 -1.40 -3.69 Chile peso 680.8 -0.97 4.25 Colombia peso 3108 -0.87 1.97 Peru sol 3.3971 -0.33 0.50 Argentina peso (interbank) 14.5000 0.83 -10.47 Argentina peso (parallel) 14.89 0.60 -4.16 (Reporting by Bruno Federowski; Additional reporting by Paula Arend Laier; Editing by Dan Grebler)
© Thomson Reuters 2017 All rights reserved.