April 7 – Latin American assets extended their recovery into a second session on Tuesday, as risk assets were propped up by hopes that the coronavirus outbreak had peaked in several hotspots.
Data showing that new infections were slowing across several U.S. states, coupled with a lower rate of deaths in several European countries, led many to believe that the virus would plateau.
“If the incipient recovery in risk appetite and commodity prices continues and … the global economy starts to recover in the second half of the year, most EM currencies will probably recover more of the ground they have lost this year,” said Jonas Goltermann, senior economist at Capital Economics.
Brazil’s real BRL= added 1.3%, while the Colombian peso CLP= rose 1.9% against a weaker dollar. FRX/
Mexico’s peso MXN= rose almost 2%, bouncing from last session’s record. On Tuesday, data showed Mexican consumer prices eased in March closer to the central bank’s 3% target rate and below analyst expectations.
“(The inflation number) should ease near-term concerns at the central bank about the impact of the weakness of the peso on prices,” wrote analysts at Capital Economics in a note.
“With the economy likely to enter a deep recession due to the coronavirus and the government seemingly doing little to help, interest rates are likely to be lowered sharply. We’ve penciled in 200 basis points of cuts this year.”
Most regional stocks rallied, taking MSCI’s index of Latam stocks .MILA00000PUS xx% higher. But, in line with the United States, stocks pared some gains as caution prevailed over the likelihood of a deep global recession. .N
Argentine stocks .MERV slipped, however, looking to break a five-session wining streak.
Rating agency Fitch downgraded Argentina following postponement of upcoming payments on foreign currency debt by the government. A poll by Argentina’s central bank showed economists see the outlook darkening.
Brazil’s Bovespa .BVSP surged around 3.5%. State-run oil and gas behemoth Petroleo Brasileiro PETR4.SA rallied after it approved lower oil production in April than from the same month a year ago.
Colombian stocks .COLCAP added 0.5% in its fourth straight session of gains, while Mexican shares .MXX rose 1.2%.
Still, the gains were a fraction of what was lost over a month-long rout.
Chile’s peso CLP= and stocks .SPIPSA weakened. Data showed imports plunged in March, while exports fell as the value of copper shipments dropped 7.6%. Chile is the world’s largest copper producer.
Latin American stock indexes and currencies 1930 GMT:
Daily % change
MSCI Emerging Markets .MSCIEF
MSCI LatAm .MILA00000PUS
Brazil Bovespa .BVSP
Mexico IPC .MXX
Chile IPSA .SPIPSA
Argentina MerVal .MERV
Colombia COLCAP .COLCAP
Daily % change
Brazil real BRBY
Mexico peso MXN=D2
Chile peso CLP=CL
Colombia peso COP=
Peru sol PEN=PE
Argentina peso (interbank) ARS=RASL
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