August 14, 2019 / 7:43 PM / 10 days ago

EMERGING MARKETS-Recession fears plague Latam markets, Argentina peso slides further

 (Updates prices)
    By Susan Mathew
    Aug 14 (Reuters) - Latin American markets were no exception
to a slump across markets on Wednesday on rising fears of a
looming recession, while Argentina's peso showed no signs of
stabilizing despite the president's attempts to calm investors
with relief measures. 
    An inversion in the U.S. yield curve for the first time
since 2007 - a classic signal for recession, following bleak
data out of Germany and China - weighed heavily on investor
sentiment as it returned focus to the impact of a bruising trade
war on global economic growth.
    After a day of relief on news that Washington would delay
10% tariffs on some Chinese goods, currencies in Brazil,
Mexico, Colombia all fell well more that 1%, while
Chile's peso slipped a percent.
    Regional stocks also slid, with Mexico's main index
sinking to its lowest in more than 5 years, while Brazil's main
index tumbled 3% and was on track for its worst day in
4-1/2 months.
    At the bottom of Brazil's main index were shares of
education company Kroton SA down nearly 10% after
weaker-than-expected quarterly results, followed by planemaker
Embraer which reaffirmed it would report a loss for
2019.
    In Argentina, the peso closed down 7.1% at 60.2
to the dollar in its third straight day of heavy losses, and the
Merval stock index skid 2.4%, finding no solace from a
package of welfare subsidies and lower taxes for workers
unveiled by President Mauricio Macri.
    The rout in Argentine markets was set-off by Macri's loss by
a wide margin to opposition candidate Alberto Fernandez in
presidential primaries on Sunday as it raised risks of a return
to interventionist policies under Fernandez if he were to win in
October general elections. 
    Fernandez on Wednesday said Macri's new economic measures
are too late and warned that Argentina could run out of foreign
currency reserves as it defends the peso. Including Wednesday's
auction, the bank sold $355 million from its own reserve this
week.
    "Markets will pay close attention to the upcoming
Treasury-bill maturities as roll-over risks remain high," said
Morgan Stanley analysts in a note. 
    Between now and the elections, almost $14.7 billion of
T-bills will mature, they say and see this as another potential
concern particularly as the debt burden increases with a weaker
peso.
    "With markets already pricing in a very low probability of
policy continuity and high uncertainty regarding the path for
economic policy, liquidity and solvency issues will be watched
closely." 
    IHS Markit's latest estimate prices the probability of a
sovereign default within the next five years at 78%.

    
    Key Latin American stock indexes and currencies at 1930 GMT:
    Stock indexes             Latest    Daily %
                                         change
 MSCI Emerging Markets          963.38     -0.57
                                        
 MSCI LatAm                    2583.91      -4.2
                                        
 Brazil Bovespa              100135.38     -3.06
                                        
 Mexico IPC                   38657.95     -2.07
                                        
 Chile IPSA                    4792.25      -1.1
                                        
 Argentina MerVal             29604.03     -2.44
                                        
 Colombia IGBC                12467.37     -1.54
                                        
                                                
       Currencies             Latest    Daily %
                                         change
 Brazil real                    4.0357     -1.74
                                        
 Mexico peso                   19.6971     -1.66
                                        
 Chile peso                      711.2     -0.87
                                        
 Colombia peso                 3455.68     -1.33
 Peru sol                        3.396     -0.35
                                        
 Argentina peso                59.7000     -6.37
 (interbank)                            
                                        
 
 (Reporting by Susan Mathew in Bengaluru;
Editing by Nick Zieminski)
  
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