Latam stocks fall on virus woes; Mexican peso weak before rate move

Latin American stocks were bogged down on Thursday by a rise in coronavirus cases in the region, while the Mexican peso underperformed on bets of more monetary easing ahead of a central bank meeting later in the day.

The peso slipped 0.3% against the dollar, as investors expected the Bank of Mexico to cut the key interest rate by 50 basis points to 5.0% in a bid to alleviate the pandemic's economic pain.

"The Mexican central bank (Banxico) is likely to continue its rate cut cycle today; by now the key rate in Mexico is much higher than in many other emerging market countries," said You-Na Park-Heger, FX and emerging markets analyst at Commerzbank.

"It is quite possible that the central bank will even provide an indication in its statement that it has almost reached the end of the rate cut cycle. If that were to be the case, the peso might benefit."

MSCI's index for Latin American stocks fell 1.3% on Thursday and has fallen 32% this year, with the region emerging as a new global coronavirus hot spot and investors questioning the pace of any recovery.

Researchers said the death toll from COVID-19 in Latin America is expected to rocket to 388,300 by October, with Brazil and Mexico seen accounting for two-thirds of fatalities.

The Brazilian real fell 0.3% after the central bank slashed its 2020 economic growth forecast to minus 6.4% from zero due to the COVID-19 crisis, and warned that uncertainty surrounding the pace of recovery in the second half of this year remains unusually high.

The Chilean peso strengthened against the dollar, price of copper, the country's biggest export, pushing higher as a surge in coronavirus cases fueled worries about mine shutdowns and shortages.

Chilean state miner Codelco, the world's largest copper producer, on Wednesday reported the death of a third worker from the new coronavirus.

In Argentina, Economy Minister Martin Guzman said the country is working with its creditors to reach a debt restructuring deal after talks stalled, though there is still distance to cover in economic and legal terms.