Latin America stocks dip on global economy concerns

MEXICO CITY/SAO PAULO (BestGrowthStock) – Latin America stocks slipped on Monday as investors remained concerned about signs of slowing growth in the global economy.

Volume was low due to a holiday in the United States and the MSCI Latin American stocks index (.MILA00000PUS: ) fell 0.58 percent to 3689. The index posted its worst week since May last week.

Weak U.S. and Chinese data last week spurred sharp drops in global stock markets and raised concerns that growth could be slowing in Latin America’s two most important trading partners.

“The question is whether the drop in equities was profit taking after a good rally since last year, or if it is due to worries of a double dip recession that people have been talking about,” said a trader in Mexico City.

Traders said the market could get increasingly nervous about the results of stress tests that Europe’s banking watchdogs have been conducting to measure the strength of banks in the face of economic or other shocks. Results are expected in the second half of July.

European banks have major operations in Latin America and if they have to rein in lending due to concerns about their balance sheets, it could weigh on growth in Latin America, analysts said.

Brazil’s Bovespa stock index (.BVSP: ) fell 0.5 percent, dragged down by a 2.3 percent loss in Brasil Foods (BRFS3.SA: ).

Investors have knocked more than 10 percent off the stock since last week after Brazil’s finance ministry last week recommended regulators impose restrictions on the 2009 merger that formed the company.

Shares in Vale (VALE5.SA: ), the world’s largest producer of iron ore, fell 0.76 percent.

Mexico’s IPC stock index (.MXX: ) rose 0.11 percent, supported by a 0.56 percent gain in shares of miner Grupo Mexico (GMEXICOB.MX: ). Shares in breadmaker Bimbo (BIMBOA.MX: ) lost 0.57 percent.

The IPC has shed more than 4 percent since June 21, after a string of weak data in the United States raised concerns the economic recovery in the United States is slowing, which could crimp growth in Mexico’s closely-linked economy.

Last week, the IPC posted its worst week since January, even after edging up at the end of the week off its lowest level since early June.

“The perception of risk in the European banking sector remains elevated,” wrote Rodolfo Campuzano, head of analysis at brokerage Invex, in a note to clients.

“It is probable that (stocks) will again try to break the lower support levels that were hit in the middle of last week,” Campuzano wrote

Chile’s blue chip IPSA index (.IPSA: ) lost 0.47 percent. The index reached a life high in June, but has since retreated.

Shares in industrial conglomerate Copec (COP.SN: ) were down 0.69 percent and retailer Falabella (FAL.SN: ) lost 3.95 percent.

(Reporting by Michael O’Boyle in Mexico City and Luciana Lopez in Sao Paulo)

Latin America stocks dip on global economy concerns