Wires

EMERGING MARKETS-Latam currencies weaken as recession clouds loom

Susan Mathew

(New throughout, updates prices) Oct 1 (Reuters) - Latin American currencies started October on a weak footing on Tuesday after a surprise downturn in U.S. manufacturing, while uncertainty about the passage of Brazil's pension reforms hurt the country's assets. Regional currencies lost between 0.06% and 0.6%, with the Mexican peso slipping to its lowest in nearly one month, while Colombia's peso touched an all-time low. U.S. manufacturing activity tumbled to a more than 10-year low in September as lingering trade tensions weighed on exports, data showed, stoking fears of slowing growth in the world's largest economy. "This week's U.S. data calendar will be notable in shaping risk sentiment, particularly ahead of the U.S.-China trade talks," wrote Mazen Issa, a senior FX strategist at TD Securities, in a research note. Representatives from the United States and China are due to resume high-level trade talks next week in Washington. "Developments in U.S. high yield space also suggest some caution," he said, adding that the dollar may weaken further if U.S. service sector data from the Institute for Supply Management also slip. A slowdown in U.S. economic growth at a time when a European recession seems imminent would remove one of the few bright spots among global markets. That pushed both U.S. stocks and the dollar lower. Brazilian stocks also fell on uncertainty about the passage of an overhaul to the country's bloated pension system, a change seen as crucial in helping to revive the economy. The government's leader in the upper house on Tuesday said a second-round vote on pension reform scheduled for next week in Brazil's Senate may not take place if the government reneges on promises made to lawmakers in return for their support.

Government data showed Brazil's trade surplus in September was the smallest in five years and missed market expectations.

In Mexico, a central bank survey showed that analysts lowered their expectations for inflation and growth this year. Mexico's economy, which barely avoided a recession in the first half of the year, saw manufacturing contract for the fourth straight month in September. Mexico's finance minister said the country may eventually require a revamped tax code after the first three years of President Andres Manuel Lopez Obrador's administration for which he has promised no new taxes. Chile's peso weakened the least among regional currencies after data showed growth in economic activity beat expectations, boosted by a surge in mining following several months of sluggish growth.

Key Latin American stock indexes and currencies at 1930 GMT:

Stock indexes Latest Daily %

change

MSCI Emerging Markets 998.17 -0.28MSCI LatAm 2648.53 -0.69Brazil Bovespa 104004.67 -0.71Mexico IPC 42920.28 -0.21Chile IPSA 5043.14 -0.31Argentina MerVal 30016.35 3.266Colombia IGBC 12866.40 0.27Currencies Latest Daily %

change

Brazil real 4.1624 -0.18Mexico peso 19.8184 -0.46Chile peso 728.72 -0.06Colombia peso 3493.5 -0.48Peru sol 3.386 -0.50Argentina peso 57.6400 -0.08

(interbank)

(Reporting by Susan Mathew in Bengaluru; Editing by Richard Chang)