Recession worries see Latam assets mark bleak start to new quarter



* Chilean peso hair's breadth away from record lows

* Brazil adds benefit for taxi drivers to aid package

* Mexican bonds to outperform Latam peers - BNY Mellon

By Susan Mathew

July 1 (Reuters) - Latin American currencies fell sharply on Friday, with Brazil's real hitting their lowest in almost five months and Chile's peso just inches from record lows, as worries that major economies will tip into recession sent investors to safe havens.

As major central banks prioritize inflation control, investors are starting to price in a hit to economic growth.

MSCI's index of emerging market stocks .MSCIEF which marked its worst first half on record, dropped another 0.9%.

Its currencies counterpart .MIEM0000CUS hit seven-week lows, down 0.3%, as the dollar reigned supreme.

A surge in commodity price due to sanctions on Russia was seen keeping assets of resource-rich Latam buoyant. But with the recent slide in their prices combined with some political ructions, regional assets have taken a beating.

As copper and oil prices tumbled, exporter of the respective items, Chile and Colombia, saw their currencies lose 1.9% and 1.2% on Friday.

Investors seemed to look past data that showed economic activity in Chile in May topped expectations, as well as an expected 150 basis points hike by Colombia's central bank late on Thursday.

Brazil's real BRBY slid 1.8% with eyes on a stimulus package that could see the government breach its revised spending cap as President Jair Bolsonaro seeks to regain support ahead of elections in October.

The government added yet another benefit on Friday, this time for taxi drivers, in the amount of 2.5 billion reais to the proposal.

The pre-election aid package now awaits approval from the Lower House, which seen green-lighting the plan.

Mexico's peso MXN= dropped 1.2% after having marked meager second quarter losses compared to other developing market currencies. Mexico benefits from its proximity and trade with the United States.

"We believe (Mexican bonds) will likely outperform in the region (in the second half of the year) because the ruling Morena party may have reached a stalemate in congress on energy reforms," said Daniel Tenengauzer, head of markets strategy at BNY Mellon, referring to a plan to tighten state control of the electricity market.

"This arguably positive news reflects broader stagnation of the party's white elephant projects," he said, adding that the non-energy trade balance remains in surplus as Mexico continues to monetize opportunities arising from global protectionist policies.

Among stocks Brazil's Bovespa .BVSP fell 0.2%, while most others were in the black.

Key Latin American stock indexes and currencies at 1405 GMT: Stock indexes

Latest

Daily %

change MSCI Emerging Markets

991.92

-0.87 .MSCIEF

MSCI LatAm

2011.51

-1.45 .MILA00000PUS

Brazil Bovespa

98258.58

-0.29 .BVSP

Mexico IPC

47614.05

0.19 .MXX

Chile IPSA

4982.05

0.64 .SPIPSA

Argentina MerVal

0.00

0 .MERV

Colombia COLCAP

1333.32

0.79 .COLCAP

Currencies

Latest

Daily %

change Brazil real

5.3280

-1.83 BRBY

Mexico peso

20.3371

-1.22 MXN=D2

Chile peso

935.9

-2.10 CLP=CL

Colombia peso COP=

4191.6

-1.18 Peru sol

3.8126

0.05 PEN=PE

Argentina peso

125.4000

-0.14 (interbank) ARS=RASL


Reporting by Susan Mathew in Bengaluru; Editing by Alison Williams

Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.

All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.

Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.

We are using cookies to give you the best experience on our website. Read more or change your cookie settings.

Risk Warning: Your capital is at risk. Leveraged products may not be suitable for everyone. Please consider our Risk Disclosure.