Emerging Markets: Latin American stocks slump to nine-week low

Latin American stocks sank to a nine-week low on Friday after riots in Egypt spurred fears of a wider crisis that could drive up oil prices, adding to local inflation concerns in Brazil and Chile. The MSCI Latin American stocks index moved down 2.22 percent to close at its lowest since November 23.
Stocks around the world fell as images of Egyptians rioting in the streets splashed across televisions, sparking fears of similar unrest elsewhere in the Middle East that could lead to higher oil prices that could hurt global growth. "This could be the next crisis," said Juan Jose Resendiz, head of analysis at brokerage Arka in Mexico City. "If this gets worse, it could contaminate other countries. There could be a general crisis in the Middle East and that would have consequences for oil and inflation," he added.
Emerging market ETFs sank to four-month lows. The iShares MSCI Brazil ETF fell 2.14 percent while the iShares MSCI Emerging Markets Index Fund ETF gave up 3.14 percent. The global fears added to concerns in Brazil about rising inflation and higher borrowing costs.
The government has promised to cut spending to help cool growth, but the cuts have yet to materialise, and investors could remain nervous until a proposal, expected in February, comes out, analysts said. "The domestic market is very worried about inflation and monetary policy," said Marco Melo, head of research at Agora Corretora in Sao Paulo. Brazil's benchmark Bovespa index fell 1.99 percent to close at its lowest since September.
Mining giant Vale, the world's largest producer of iron ore, led losses, falling 2.02 percent. Heavy rains over recent weeks have interrupted the company's shipments. Shares of meat processor JBS fell 4.89 percent. The stock has seen choppy trading recently on uncertainty around a possible take-over of Sara Lee. Mexico's IPC stock index dropped 1.62 percent.
Shares in Cemex, the world's No 3 cement maker, shed 7.21 percent after Cemex said it would propose issuing up to 6 billion new shares as part of a debt refinancing agreement, prompting a slide in its shares. Chile's IPSA index fell 1.97 percent also closing at its lowest level since September as global nervousness combined with concerns about local inflation.
Members of Chile's central bank board worry about the impact of rising food prices on inflation, and currency intervention could compound price pressures, according to bank minutes published on Friday. Shares of conglomerate Copec moved down 2.83 percent, as LAN Airlines sank 3.19 percent.