June 24, 2020 / 7:29 PM / 12 days ago

EMERGING MARKETS-Latam FX, stocks fall on spike in virus cases, dour growth forecast

    * Brazil's real down 3.3%, Mexico's peso ends 3-day winning
run
    * IMF slashes Latam growth forecast on pandemic woes
    * Mexico inflation rises but analysts say rate cut still on
    * MSCI warns Argentina could be booted from EM index

 (Updates prices)
    By Shreyashi Sanyal and Susan Mathew
    June 24 (Reuters) - Latin American currencies and stocks
fell on Wednesday, with Brazil's real down 3%, as COVID-19
infections continued to climb at an alarming pace, with
investors scurrying for safety after downbeat economic forecasts
for major regional countries. 
    The death toll from COVID-19 surpassed 100,000 in Latin
America on Tuesday, according to a Reuters tally, with few signs
of the outbreak easing. A surge in cases in the United States
and parts of Europe dented broader sentiment.

    The International Monetary Fund slashed its 2020 global
output forecasts further as it now expects global output to
shrink 4.9%, compared with a 3.0% contraction predicted in April
due to impacts of the pandemic.
    Latin American economies saw some of the biggest downgrades,
with Brazil's now seen shrinking 9.1%, Mexico's 10.5% and
Argentina's 9.9%. 
    The MSCI's index of regional stocks counterpart
 slumped 3.7% and its currency counterpart
 2.3%, both marking their worst day in two
months. They are down about 35% and 19% for the year, despite
double digit percentage recoveries since year-lows. 
    The Brazilian real weakened 3.3%, the most among
regional peers. 
    Brazil's public sector primary deficit this year excluding
interest payments could be more than 11% of gross domestic
product, Treasury Secretary Mansueto Almeida said, while the
economy is set to shrink about 6% to 7%.
    The Mexican peso declined 1.6% after a three-day
winning streak. Mexico's President on Wednesday said total
layoffs in June could reach as high as 130,000. 
    Data on Wednesday showed Mexican consumer prices rose more
than expected during the first half of June, a figure that will
likely keep policymakers in a cautious mood but is unlikely to
deter them from slashing rates on Thursday to 5%. 
    "Given the scale of the economic downturn, there's still
scope for significant easing," said William Jackson, chief
emerging markets economist at Capital Economics. "We expect 150
basis points of cuts in the policy rate this year, including a
50bps reduction tomorrow."
    Other regional currencies traded lower against a stronger
U.S. dollar.
    Among others, MSCI Inc, the world's largest index
provider, warned on Tuesday that Argentina could be removed from
the MSCI Emerging Markets Index if it became harder for foreign
investors to access its stock market.      
    Argentina imposed tough capital controls last year after a
market crash led to a dramatic pickup in foreign currency
demand.    
    
    Key Latin American stock indexes and currencies at 1902 GMT:
  Stock indexes           Latest   Daily %
                                   change
 MSCI Emerging Markets    1008.57     -0.6
                                   
 MSCI LatAm               1905.58    -3.71
                                   
 Brazil Bovespa          94227.93    -1.82
                                   
 Mexico IPC              37871.51    -0.91
                                   
 Chile IPSA               4036.34     0.11
                                   
 Argentina MerVal        40285.85   -1.269
                                   
 Colombia COLCAP          1117.01     -2.3
                                   
                                          
      Currencies          Latest   Daily %
                                   change
 Brazil real               5.3260    -3.27
                                   
 Mexico peso              22.7756    -1.61
                                   
 Chile peso                 818.8    -0.06
                                   
 Colombia peso            3727.62    -0.79
                                   
 Peru sol                  3.5078     0.40
                                   
 Argentina peso           70.0900    -0.07
 (interbank)                       
                                   
 
 (Reporting by Shreyashi Sanyal in Bengaluru; Editing by
Bernadette Baum and Tom Brown)
  
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