Emerging markets: Latam stocks sharply on China, Europe

BRASILIA, April 14 — Latin American stocks fell across the board yesterday on worries the global economy may slow after China reported lackluster growth and fears over Europe‘s debt problems resurfaced in Spain.

The MSCI Latin American stock index was down 2.03 per cent, losing 2.35 per cent for the week in its sharpest weekly fall in more than a month.

“There is a lot of volatility out there because investors are still worried about Europe and the global economy,” said Andre Perfeito, analyst with Gradual Investimentos in Sao Paulo.

“Any string of bad news is used as an excuse for profit-taking right now.”

In Mexico, traders were puzzled by a drop of 1.7 per cent in the index in the 15 minutes before the close. After trading ended, Mexico’s exchange concluded that the abrupt drop was caused by a brokerage error and they set to work to adjust the index.

Mexico’s IPC stock index officially closed at 39,137, officials said late yesterday. That tally came hours after the surprise fall that saw the index down 2.32 per cent to 38,444 points.

Indexes that include the IPC also face revision.

Latin American stocks have risen about 10 per cent this year after a sharp fall in 2011 when the European debt crisis threatened to sink the global economy.

Yesterday, some of those fears crept back up when the cost of insuring Spanish government bonds hit an all-time high. Investors fretted about the finances of Spain, a country that has replaced Greece as the centre of the crisis.

“The root of the problems for global markets is more based on the same old fears that we had last year: sovereign debt. It’s clearly returning to focus,” said Oliver Leyland at Mirae Asset Global Investments in Sao Paulo.

Next week, Spain will continue to test investors’ confidence when it tries to sell new 2- and 10-year bonds at an auction being closely watched by investors of riskier assets, who tend to shed those assets when the global outlook turns sour.

Also pressuring shares, the Chinese government reported first-quarter growth came in at 8.1 per cent, the slowest pace in three years and below the 8.3 per cent consensus forecast of economists polled by Reuters.

China is the world’s leading consumer of raw materials, and slower growth would dent demand and prices of commodities that are at the heart of many Latin American economies.

Latin America is a key source of global commodities like oil, copper, iron ore, soy and corn.

Brazil’s benchmark Bovespa stock index was down 1.51 per cent yesterday, its fourth drop in five days. The index fell 2.4 per cent this week, its fourth consecutive week of losses.

Bank shares were being pressured by Brazil‘s toughened tone on private sector banks to bolster lending and lower interest rates, Leyland added.

Banks Itau Unibanco and Banco Bradesco both fell, losing 3.88 and 2.01 per cent respectively.

In Mexico, shares of retailer and bank company Elektra fell sharply for the second straight day after the local exchange announced rule changes that will reduce the company’s weighting in the benchmark index.

Elektra slipped 16.41 per cent. The company’s shares account for about 4 per cent of the index’s weight.

Chile’s blue-chip IPSA stock index dropped 0.49 per cent. The index logged its biggest weekly drop for the year, falling 2.5 per cent.

The IPSA has been steadily falling, and a trader called it “an expected and healthy correction.” The index had closed at an 8-1/2-month high on the first trading day of April. — Reuters

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