BRASILIA: Latin American currencies and stocks fell sharply on Tuesday, erasing part of recent gains after weaker factory data in China dragged commodities prices away from four-month highs.
Brazil's Bovespa stock index dropped nearly 2 percent and the broader MSCI Latin American stock index tumbled 3 percent, while currencies dropped more than 1 percent against the US dollar.
Activity at China's factories shrank for the 14th straight month in April as demand stagnated, a private survey showed. China is a major buyer of Latin America's raw materials, from oil to Brazilian iron ore and Chilean copper.
Shares of Brazilian miner Vale SA, the world's largest iron ore producer, fell nearly 5 percent as commodities prices slipped 1.3 percent.
Losses in the Brazilian real were intensified by ongoing central bank intervention. The bank offered reverse swaps for a third consecutive day on Tuesday as part of its broader efforts to curb currency gains.
"All emerging currencies are weakening today. The central bank (intervention) is just the icing on the cake," said Pedro Tuesta, an economist with research firm 4Cast.
Tuesday's drop in Latin American markets contrasted with a strong first quarter, in which equities and currencies gained steadily on signs of renewed central bank efforts in the United States, Japan and Europe to boost economic growth.
The MSCI Latin American stock index has gained 23 percent so far this year, while the Brazilian currency strengthened 10 percent to hit an eight-month high last week, despite a two-year long recession and a paralyzing political crisis.
Banking shares also weighed on Brazilian equities after Ita? Unibanco Holding SA, the country's largest bank by market value, missed first-quarter profit estimates. Ita? shares dropped more than 4 percent as the recession eroded loan book quality and prompted the bank to beef up loan-loss provisions.
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