By Carla Mozee
Major Latin American stock markets dropped sharply Friday, with
the sell-offs in line with a slide on Wall Street as investors
remain shaken by the prospect that global economy recovery will be
hurt by Europe's debt troubles.
Losses in the region ranged between 3.5% and 1% as the S&P
500 Index (SPX) measuring the broad U.S. equity market slumped 2%
and the Dow Jones Industrial Average (DJI) stumbled more than 200
points during the session.
Brazil's Bovespa index fell 2.3%. Argentina's Merval lost 3.5%
and Mexico's IPC gave up 1.5%.
Chile's IPSA fell 1% to 3,830.50. Late Thursday, Chile's central
bank held its key interest rate at 0.5%, as expected, but policy
makers indicated that it's considering a rate hike.
Among exchange-traded funds, the iShares Brazil Index Fund (EWZ)
declined 3%. The iShares Mexico fund (EWW) fell 2.6% and the
iShares Chile fund (ECH) gave up 2.4%.
As investors fled assets they perceive as risky, the currencies
of Brazil, Mexico and Chile dropped against the U.S. dollar.
Meanwhile, the euro hit its lowest level against the dollar since
2008. The euro's drop was sparked by a report -- that has since
been denied -- that France's president had threatened to pull his
nation out of the euro zone.
Earlier this week, the European Union and the International
Monetary Fund created a nearly $1 trillion financial-aid package
for vulnerable euro-zone nations. Greece last week approved
austerity measures, followed by steps announced this week in
Portugal and Spain.
"But, while Greece is the most profligate of EU members, it is
not alone in its predicament as markets have punished Portugal,
Italy, Ireland and Spain as well," wrote Sherry Cooper, chief
economist at BMO Capital Markets, wrote in a note distributed
Friday.
"The required fiscal contraction needed to reduce these
longer-term structural deficits will bludgeon economic activity,
exacerbating the deficit problem over the near term," she
wrote.
In Sao Paulo, Petrobras (PBR) fell 1% as crude oil for June
delivery tumbled more than 4% to below $72 a barrel on the New York
Mercantile Exchange. The state-run oil giant is slated to release
its results for the first quarter late Friday. Earnings are
expected to climb 19% to 6.93 billion reals, according to a Dow
Jones Newswires poll of analysts.
Other resource-related stocks were hit as dollar-denominated
prices for commodities fell amid strengthening in the greenback.
Brazilian steel maker Gerdau (GGB) lost 3.4% and Usiminas fell
4.5%.
In Buenos Aires, locally traded shares of Petrobras fell 3.6%.
Petrobras Energia (PZE), the Argentina-based unit of Petrobras,
dropped 2% and steel producer Siderar (ERAR.BA) fell 3.6%. In
Mexico City, shares of copper miner Grupo Mexico lost 2%.
But shares of tortilla producer Gruma (GMK) was among the few
advancers in Friday's session, up 1%. The shares recouped a portion
of their 6.6% loss on Thursday when Venezuela took over Gruma's
unit in the country.