August 14, 2019 / 3:01 PM / 2 months ago

EMERGING MARKETS-Latam markets struggle as recession fears grow; Argentine peso down again

    By Sruthi Shankar
    Aug 14 (Reuters) - The Argentine peso declined for a third
day on Wednesday and most Latin American markets weakened as
worrying economic data from China and Germany and moves in U.S.
bond markets suggested a recession for major global economies is
on the horizon as a bruising U.S.-China trade war drags on.
    The Brazilian real fell more than 1%, crossing the
key 4-per-dollar level for a third day in a row. The Mexican
, the Chilean and the Colombian pesos
dropped between 0.6% and 0.8%.
    Emerging markets have been swayed this week by a plunge in
Argentina's peso currency to a record low, news that U.S.
tariffs on certain Chinese goods will be delayed and an
inversion of the U.S. Treasury bond yield curve for the first
time since 2007, a classic recession signal.
    The moves in bond market followed data earlier that showed
Germany's economy shrank in the second quarter as a result of a
slump in exports, while another set showed industrial output
growth in China cooling to a more than 17-year low.

    There were few signs of the Argentine peso
stabilizing as President Mauricio Macri announced measures
including income tax cuts for workers and increased subsidies
for social services after his shockingly poor showing in
Sunday's presidential primaries.
    The peso opened 12.3% weaker at 61 per U.S. dollar, set for
its third session of losses. The currency has shed more than 20%
since Sunday when the center-right leader finished far behind
his chief Peronist challenger, Alberto Fernandez, in primary
elections, bringing worries of populist policies for financial
markets.
    "These measures are unlikely to change the election results
or stabilize financial markets, even though a large part of the
re-pricing is now likely behind us," Citi analysts wrote in a
note.
    Although the Merval stock index recovered slightly,
the probability of a sovereign default by Argentina within the
next five years shot up to 78%.
    Among other stock markets, the Bovepsa fell 1.8% as
Brazil's largest education company, Kroton Educacional SA
, slid 7% after reporting quarterly results. 
    Planemaker Embraer dropped 3% after reaffirming
it would report a loss for 2019.

    Latin American stock indexes and currencies at 1441 GMT:
    
   Stock indexes           Latest    Daily %
                                     change
 MSCI Emerging Markets       965.08    -0.39
                                     
 MSCI LatAm                 2621.36    -2.81
                                     
 Brazil Bovespa           101319.99    -1.92
                                     
 Mexico IPC                38884.29     -1.5
                                     
 Chile IPSA                 4801.48    -0.91
                                     
 Argentina MerVal          30609.55     0.87
                                     
 Colombia IGBC             12519.34    -1.13
                                     
                                            
      Currencies           Latest    Daily %
                                     change
 Brazil real                 4.0111    -1.13
                                     
 Mexico peso                19.5494    -0.92
                                     
 Chile peso                     711    -0.84
                                     
 Colombia peso              3444.81    -1.02
                                     
 Peru sol                     3.393    -0.27
                                     
 Argentina peso             58.1000    -3.79
 (interbank)                         
                                     
 
 (Reporting by Sruthi Shankar in Bengaluru)
  
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