May 14, 2020 / 2:56 PM / 16 days ago

EMERGING MARKETS-Latam FX, stocks weaken as economic recovery seen far away

    By Susan Mathew
    May 14 (Reuters) - Latin American currencies weakened on
Thursday, with Brazil's real inching closer to all-time lows, as
risk appetite waned on signs the global economy may be under
duress for longer than feared due to the novel coronavirus
outbreak. 
    The dollar surged on its safe-haven appeal, building on
gains made after U.S. Federal Reserve Chair Jerome Powell
quashed any bets of negative interest rates.
    The Mexican peso traded flat with all eyes on Bank of
Mexico's meeting later in the day. The consensus expectation is
for a 50 basis-point cut in interest rates, although analysts
say a bigger cut might not be unwarranted.   
    Brazil's real slipped 0.4% with latest data showing
nearly 189,000 total COVID-19 cases, making it the sixth-worst
country hit by the outbreak. Criticism against President Jair
Bolsonaro has been rising as he pushes against social distancing
protocols.
    The government on Wednesday cut Brazil's 2020 GDP forecast
to a contraction of 4.7% from 0%. 
    The World Health Organization on Wednesday said the virus,
which causes the COVID-19 disease, could become endemic like HIV
and may be here to stay. This, along with Powell's comments of a
prolonged recession, saw investors shun risk.
    U.S.-China trade tensions also played in after U.S.
President Donald Trump on Thursday said he was very disappointed
in China over its failure to contain the novel coronavirus, and
that the pandemic cast a pall over his trade deal with Beijing.

    "We don't expect an all-out trade war to resume. Yet a shift
in political rhetoric and other actions could reinforce the
shift in risk appetite," said Mark McCormick, global head of FX
strategy at TD Securities. 
    Falling copper prices pushed the Chilean peso off
10-week highs, while the country on Wednesday announced a
general quarantine for greater Santiago to force down a sharp
resurgence of coronavirus cases in the capital.
    The Colombian peso was set for its biggest percentage
fall in two weeks. A Reuters poll showed the local economy may
have marked its last quarter of expansion in the first quarter
before it enters a recession. The data is due on
Friday.
    Regional stocks followed U.S. stocks into the red, with
insurance firm Sul America and carrier Azul
 leading declines on Sao Paulo's main index,
after reporting quarterly results. 
    Chilean stocks stayed at six-week lows, extending
losses to a fifth session, while Colombian shares hit
their lowest in seven weeks.  
       
    Key Latin American stock indexes and currencies at 1432 GMT:
  Stock indexes           Latest   Daily %
                                   change
 MSCI Emerging Markets     894.48    -1.62
                                   
 MSCI LatAm               1495.22    -2.07
                                   
 Brazil Bovespa          75953.10    -2.34
                                   
 Mexico IPC              35781.70    -1.68
                                   
 Chile IPSA               3561.39    -1.21
                                   
 Argentina MerVal        37616.47   -0.598
                                   
 Colombia COLCAP          1043.94    -1.07
                                   
                                          
      Currencies          Latest   Daily %
                                   change
 Brazil real               5.9253    -0.42
                                   
 Mexico peso              24.2090    -0.03
                                   
 Chile peso                   824    -0.78
                                   
 Colombia peso            3951.09    -1.22
                                   
 Peru sol                  3.4507    -0.34
                                   
 Argentina peso           67.6300    -0.12
 (interbank)                       
                                   
 
 (Reporting by Susan Mathew in Bengaluru; Editing by Lisa
Shumaker)
  
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