Brazil and regional stocks fall; Mexico outperforms
The MSCI Latin American stocks index .MILA00000PUS slipped 1.3%, while the currencies equivalent .MILA00000CUS declined 0.4%.
Equities in Brazil .BVSP fell 1.3%, while the real BRL= weakened 0.5%. The U.S. late on Wednesday announced 25% tariffs on many imports from Brazil but unveiled a broader-than-expected exemption list.
Right-wing Senator and presidential hopeful Flavio Bolsonaro was seeking to postpone the tariffs until after the October election in an attempt to distance himself from the duties.
The tariffs could also shake up the presidential race in Brazil. U.S. President Donald Trump has linked levies he imposed on Brazilian products last year to what he called a “witch hunt” against the senator's father, former President Jair Bolsonaro.
After the initial tariffs, President Luiz Inacio Lula da Silva's popularity increased, putting him on par with Flavio Bolsonaro.
Separately, data showed retail sales in the region's largest economy rose less than expected in May.
“We're not really leaning into Latin America in any meaningful way. We're just looking for what draws us. The rest is just residual,” said Randy Baron, portfolio manager at Pinnacle Associates.
Mexico's peso MXN= shed 0.3%, while the country's stock benchmark .MXX was flat, bucking broader declines in the region.
The U.S. Trade Representative's office said on Wednesday that trade talks with Mexico were progressing, with officials expected to hold a third round of negotiations next week.
LatAm assets weaken as dollar firms and Middle East tensions rise
Latin American currencies weakened against the dollar on Thursday, while stocks were also under pressure as renewed fears of further energy supply disruptions in the Middle East rattled sentiment.
Sources told Reuters that Iran had asked Yemen's Houthi movement to close the Red Sea oil route if the U.S. strikes Iranian power infrastructure. The route has been a critical alternative for oil supplies from the Gulf region following disruptions in the Strait of Hormuz.
The dollar index =USD gained after data showed that U.S. retail sales increased marginally in June.
“Markets are in a more cautious mood as softer U.S. inflation data continues to temper Fed tightening expectations, but rising bond yields, persistent Middle East tensions, and elevated oil prices are preventing a broader risk rally,” said analysts at LMAX Group.
Argentina and Colombia slide; Peru central bank flags El Nino risk
Among stocks, Argentina's index .MERV slid 3.2% and Colombia's .COLCAP lost 1.4%.
Peru's sol PEN= was flat. The country's central bank chief warned on Wednesday that the El Nino weather phenomenon could weigh on economic growth, as it did in May, though he added that the broader economic backdrop remained favorable thanks to elevated mineral prices.
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