By Carla Mozee
Key Latin American currencies and stock indexes dropped
Thursday, extending losses as part of a global selloff, with fears
about Europe's debt crisis continuing to have a stranglehold on the
markets.
Brazil's Bovespa equity index fell 1.7% to 58,694, and is now
flirting with bear-market territory. The index tracking Latin
America's largest stock market has tumbled 18.2% since reaching an
April 8 closing high. A decline of 20% from a recent high is
characterized by many analysts as a bear market.
Pressure on the Bovespa in part has stemmed from a double-digit
drop in shares of oil giant Petrobras (PBR), with uncertainty about
a large capitalization plan involving the government hanging over
the shares.
Mexico's IPC finished Thursday with a 2% loss at 30,368.08, with
market heavyweight America Movil (AMX) down 1.9%. The Mexican and
Brazilian indexes have finished lower for sixth sessions in a
row.
Argentina's Merval slumped 4.1% to 2,119.14, and Chile's IPSA
fell 1.8% to 3,781.22.
Fears that debt problems in Europe will eventually hurt global
economic recovery, and worries that European officials still remain
uncoordinated in their response, have intensified in recent weeks.
But even in the absence of solid news developments on a given day,
"anytime the psychology turns so quickly," any excuse to sell is
deemed as valid for investors, said Bruce Zaro, chief technical
strategist as Delta Global Advisors.
"The euro crisis could spread...or it could not rain...or
they're just in no mood to buy stocks," said Zaro. Investors,
whatever their reasoning, are in the mindset to run from perceived
risk, he said.
On Wall Street, the major U.S. stock indexes logged their first
correction of the bull run that started in November 2007. The Dow
Jones Industrial Average (DJI) fell 376 points on Thursday, and has
fallen 10% from its 2010 closing high reached April 26. The S&P
500 Index (SPX) closed Thursday's session with a 3.9% decline.
Brazil's currency, the real, finished with a 1% loss at 1.861
per U.S. dollar, and had fallen by more than 3% during the day.
Mexico's peso skidded to 13.067 from a close at 12.845 in the
previous session. Investors appeared to have set aside a report
showing that Mexico's economy expanded by 4.3% in the first quarter
of 2010 from the year-ago period. Analysts polled by Dow Jones
Newswires had, on average, expected growth of 3.8%. Gross domestic
product declined 0.35% on a seasonally adjusted basis from the
fourth quarter of 2009.
But Chile's currency erased deep losses to end at 542.81 pesos,
up from Wednesday's finish at 547.70.
In Sao Paulo trading, preferred shares of Petrobras fell 3.9% as
crude oil for June delivery ended with 2.3% decline at $70.80 a
barrel. Preferred shares of Petrobras have dropped 25% this
year.
The company's chief executive, Jose Sergio Gabrielli, has said
the shares have been hurt by uncertainty surrounding a plan under
which the government proposes to grant Petrobras rights to explore
and develop 5 billion barrels of crude in exchange for new shares
in Petrobras.
A vote in the Brazilian senate on the swap plan is expected to
be held on June 9, according to a Dow Jones Newswires report
Wednesday that cited Gabrielli who spoke at a press conference in
New York.
Among exchange-traded funds, the iShares MSCI Brazil Index Fund
(EWZ) tumbled 4.8%. The iShares MSCI Mexico Index Fund (EWW) gave
up 4.7% and the iShares MSCI Chile Investable Market fund (ECH)
fell 1.8%.
Along with worries about fiscally vulnerable countries in the
euro zone came gloomy economic reports from the U.S. on Thursday.
Weekly jobless claims unexpectedly rose, and the Conference Board's
index of leading economic indicators fell 0.1% in April, the first
monthly decline since March 2009.
In other economic developments, Brazilian consumer prices rose
0.63% through mid-May, according to the country's census bureau.
Prices as tracked by the IPCA-15 index through mid-April rose by
0.48%.