EMERGING MARKETS-LatAm currencies weaken, stocks slip

* MSCI LatAm stocks drop, tracking U.S. markets lower

* LatAm currencies mostly lower versus resurgent greenback

By Daniel Bases

NEW YORK, May 13 (BestGrowthStock) – Latin American markets drifted
lower on Thursday as investors grappled with weakness in U.S.
equities and concerns public spending cuts in Europe could
further hamper the region’s economic recovery.

A disappointing weekly U.S. jobless claims report added to
an uncertain tenor in markets which had rallied strongly after
last week’s violent sell-off. [ID:nN13129786]

MSCI’s Latin America stock index fell 0.51 percent
(.MILA00000PUS: ) while the broader MSCI emerging markets stock
index rose 0.69 percent on the day (.MSCIEF: ).

“We remain in a sort of waiting period after absorbing very
good headlines out of Europe and the overall size of the rescue
package,” Enrique Alvarez, head of research at New York-based
IDEAGlobal. “That fuel has been consumed very rapidly and now
again we have come back to an undecided period where there are
a number of lingering questions still pertaining to the
sovereign front.”

The 750 million euro ($1 trillion) financial safety net
package put together by the European Union and the
International Monetary fund is designed to end market
speculation about the vulnerability of the most debt-ridden
countries in the euro zone.

It is also expected to result in lackluster economic growth
as governments are forced to cut spending and rein in fiscal
deficits.

That concern has fueled buying of the U.S. dollar versus
the euro and has a knock-on impact for Latin American
currencies.

Against the greenback, Brazil’s real fell 0.23 percent to
1.7770 (BRBY: ) and the Mexican peso fell 0.51 percent to 12.4077
(MEX01: )(MXN=: ). The Chilean peso was slightly lower at 530.70
against the U.S. dollar.

While they may be weaker on Thursday, RBS recommended
investors buy these three currencies with a six-month time
horizon while selling the Hungarian forint, Polish zloty and
Czech crown. [ID:nN1399894]

“The disparity between the regions’ growth outlook,
interest rate cycle and their respective economic beacons
suggests relative outperformance of Latin America in both a
risk back “on” scenario as well as a more cautious risk
environment,” RBS wrote clients on Thursday.

RBS is forecasting economic growth of 4.11 percent in Latin
America this year versus euro zone growth of 1.2 percent.

Sovereign government debt traded lightly on the day, with
little change in the benchmark issues from Brazil, Russia and
Turkey.

The JP Morgan Emerging Markets Bond Index Plus
(11EMJ: )(.JPMEMBIPLUS: ) showed yield spreads narrow by 2 basis
points to 279 basis points over stronger U.S. Treasuries.

Stock Market Today

(Reporting by Daniel Bases; Editing by Andrew Hay)

EMERGING MARKETS-LatAm currencies weaken, stocks slip