MEXICO CITY: Latin American stocks fell to an eight-month low on Monday as concerns that Europe's debt troubles were deepening combined with signs of slower growth in China and Europe to undermine equities around the world.
The MSCI Latin American index fell 1.21 percent and closed at its lowest level since September as stocks in Brazil ended at their cheapest since July 2010.
Standard & Poor's cut Italy's rating outlook and Spain's ruling Socialists suffered a setback in elections, raising concerns about the government's ability to implement austerity measures.
"All this uncertainty in Europe is what is hitting us the most. It looks like it is going to be another difficult week," said Gerardo Copca, a strategist at consultancy Metanalisis in Mexico City.
Also weighing, preliminary purchasing managers' surveys pointed to marginally slower economic growth in the euro zone and China in the second quarter.
"We have already been seeing signs of general global weakness in growth, and this adds to those concerns," Copca said.
China is Brazil's top trading partner. Fears that global growth could be slowing have helped spur a sharp sell-off in commodities that has hit Latin America's materials producers.
Brazil's benchmark Bovespa stock index fell 0.4 percent, but the gauge managed to pare steeper losses to close above the 62,000 level.
Investors have also been leery of Brazilian stocks due to concerns that the central bank will need to keep hiking interest rates to fight inflation.
Adam Kutas, manager of Fidelity's Latin America Fund, told Reuters he was wary of Brazil's exporters and banks, with interest rates seen heading higher.
"Most likely they will have to hike rates further, and that will create a lot of pressure with the exporting and manufacturing part of the economy," Kutas said.
Rising interest rates have strengthened Brazil's currency, cutting into exporter profits and cheapening the imports they compete with at home.
On Monday, state-run oil company Petrobras fell 1.63 percent and steel maker Usiminas lost 1.69 percent.
Mexico's IPC index fell 0.24 percent, but the gauge managed to find support above the 34,800 level, holding above its lowest level since October that it hit last week.
Shares of broadcaster Televisa lost 1.46 percent.
Shares in billionaire Carlos Slim's America Movil rose 0.64 percent, managing a second session of gains as the stock recovers from its lowest price since March 2010.
Chile's IPSA index shed 0.43 percent as pulp producer CMPC lost 1.31 percent.
Kutas said that Chilean stocks have further upside, given official interest rates are set to plateau.
Investors have been betting that Chilean policymakers may be taming inflation, even as they worry Brazil may be falling short in the fight.
The IPSA has risen about 8 percent since the start of March, while Brazil's benchmark index is down about 7 percent in the same period.
Coming interest rate hikes in Chile could be more gradual or even paused, Central Bank board member Enrique Marshall said in a presentation released on Monday.
Copyright Reuters, 2011