March 9, 2020 / 3:31 PM / 3 months ago

EMERGING MARKETS-Carnage in Latam as oil plummets; coronavirus fears rise

    * Oil slides more than 30% 
    * Mexican peso set for its worst day in 3-1/2 years 
    * Currencies of Colombia, Brazil, Chile at record low
    * Brazil's Bovespa stock index drops as much as 10% 
    * Other stocks indexes in Latam slump between 3.6% and 10.5%

    By Susan Mathew
    March 9 (Reuters) - Mexico's peso was set for its worst day
in 3-1/2 years on Monday and Colombia's peso slumped to a record
low as the currencies of major crude oil exporters were hammered
after oil lost a third of its value. 
    Oil prices fell as much as 30% after Saudi Arabia slashed
its official crude selling price and set plans for a dramatic
increase in production following Russia's refusal to help
stabilize oil markets. The move shocked markets already reeling
under pressure from the coronavirus outbreak.
    Brazil's real and the Chilean peso both sank 
to all-time lows. Brazil's central bank said it will continue
intervening in the foreign exchange market using all tools at
its disposal to whatever extent necessary to ensure the market
functions smoothly.
    Regional stocks plunged in line with a tumble on Wall
Street, with Brazil's Bovespa stock index sinking 10%,
triggering an automatic 15-minute halt. 
    Preference shares of state oil firm Petroleo Brasileiro
 crashed 24% in what could be their worst day ever
after the company cut diesel and gasoline prices following the
slump in oil prices, a source said.
    "The oil price collapse adds a new dimension for fear and
uncertainty," said David Bahnsen, chief investment officer at
The Bahnsen Group. "Investors just have to brace for impact
until more cards are on the table."   
    The oil shock comes as the fast-spreading coronavirus has
been roiling markets for weeks, with the number of infected
cases exceeding 110,000 worldwide leading to the suspension of 
economic activity and adding to fears of a global recession. 
    Colombian oil major Ecopetrol dropped 20%, taking
Colombia's main index down 7.2% - on track for its
worst day since 2009, when the global financial crisis wreaked
havoc across markets. 
    The moves took MSCI's index of emerging market stocks
 down 5.7%, on track for its biggest percentage drop
since 2011.
    
    OIL EXPORTERS BEAR THE BRUNT
    The Mexican peso slipped as much as 8% to touch its
lowest since early 2017. Data showed Mexican consumer prices
rose 3.70 percent in the year through February, further drifting
above the central bank's target rate. 
    "For the Mexican peso, it is also about completely unwinding
the very heavy long positions that we've had build up over the
last year," said Christian Lawrence, senior market strategist at
 Latam FX at Rabobank.  
    While some analysts see Monday's decline as steep enough for
the Mexican central bank to hold rates steady next week, some
say it may still cut, but by a more cautious 25 basis points,
rather than 50 points expected as of last week.

    "The Mexican central bank will probably announce some
options stabilization as in the past, but I don't think they
will intervene in the spot market."  
    A scurry to the safety of bonds and the Japanese yen
quashed the dollar. Markets have fully priced in a
75-basis-point cut from the U.S. Federal Reserve later this
month, hot on the heels of a 50-point cut emergency cut last
week.  
    Colombia's peso was set for its worst day ever, down
more than 6% to hit a new low of 3,835.
    
    Key Latin American stock indexes and currencies at 1449 GMT:
   Stock indexes           Latest    Daily %
                                     change
 MSCI Emerging Markets       954.27    -5.71
                                     
 MSCI LatAm                 2057.87   -10.06
                                     
 Brazil Bovespa            89296.88    -8.88
                                     
 Mexico IPC                39667.35    -4.16
                                     
 Chile IPSA                 4076.68    -3.61
                                     
 Argentina MerVal          31518.59  -10.516
                                     
 Colombia COLCAP            1394.82    -7.19
                                     
                                            
      Currencies           Latest    Daily %
                                     change
 Brazil real                 4.7400    -2.24
                                     
 Mexico peso                21.0960    -4.71
                                     
 Chile peso                   840.6    -1.71
                                     
 Colombia peso              3790.84    -5.45
                                     
 Peru sol                     3.498    -0.81
                                     
 Argentina peso             62.5200    -0.06
 (interbank)                         
                                     
 
 (Reporting by Susan Mathew in Bengaluru; Editing by Dan
Grebler)
  
Nuestros Estándares:Los principios Thomson Reuters
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