EMERGING MARKETS-Latam stocks follow Wall Street lower, Brazil's real dips

Sruthi Shankar

June 14 (Reuters) - An index of Latin American stocks fell more than 1% on Friday, mirroring weakness on Wall Street, while Brazil's real dropped as optimism around the proposed overhaul of the country's pension system faded and weak economic data weighed. The real fell 0.8% to 3.88 per dollar level as the government's proposals to raise the minimum retirement age and workers' contributions to help restore public finances are drawing fierce opposition and look likely to fall short of what President Jair Bolsonaro's government was seeking. The currency was on track to give back all of its gains from Thursday when a congressional report showed the overhaul would help generate savings of 913.4 billion reais ($237 billion) over the next decade. In addition, a central bank indicator showed economic activity unexpectedly fell in April, marking the longest stretch of declining activity since the last recession in 2016.

"In our view, a big disappointment in the final expected cost-savings from the pension reform could take BRL (the real) towards the level of 5.0 against the USD," Rabobank analysts wrote in a note. While analysts added the likelihood of such scenarios were dimming, "adverse global conditions are expected to affect EM (emerging market) assets and economies, limiting the room for a more pronounced BRL rally." Broad gains for the dollar after encouraging U.S. retail sales data also limited gains for emerging market currencies. Investors are squaring up for a U.S. central bank meeting next week where policymakers might hint when they plan to cut interest rates, the prospect of which has supported risky assets in the recent weeks. The Mexican peso was marginally higher at the end of a week in which the currency outperformed after a deal was struck with United States that averted tariffs on Mexican goods. But the Chilean, the Colombian and the Argentine pesos all weakened. Stocks in the region were also hit following a weak open for Wall Street's main indexes after U.S. chipmaker Broadcom slashed sales forecasts because of the escalating U.S.-China trade war and weak industrial output data out of China. The MSCI index of Latin American stocks dropped about 1%. Sao Paulo-traded stocks were down 0.4% as major banks fell on expectations of higher taxes, while Mexico's main stock index slid 0.3%.

Key Latin American stock indexes and currencies at 1925 GMT

Stock indexes daily %Latest changeMSCI Emerging Markets 1015.55 -0.64MSCI LatAm 2759.98 -1.11Brazil Bovespa 98401.29 -0.38Mexico IPC 43350.72 -0.3Chile IPSA 5061.56 -0.2Argentina MerVal - -Colombia IGBC 12276.52 -0.08Currencies daily %

change Latest

Brazil real 3.8841 -0.78Mexico peso 19.1545 0.17Chile peso 697.8 -0.26Colombia peso 3268.94 -0.07Peru sol - -Argentina peso 43.6500 -0.64


(Reporting by Sruthi Shankar in Bengaluru)