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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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