SAO PAULO: Latin American stocks fell on Monday as fears of resurgent inflation in the United States weighed on demand for emerging market assets.
The move came on the heels of sharp losses on Friday, after data showed the largest US wage growth since 2009 fueling expectations of faster interest rate hikes this year.
The report drove profit-taking on high-yielding assets, which had rallied since the beginning of the year on an outlook of strong global economic growth.
"Friday's data has caused concern in equity markets, which have rapidly taken back a lot of January's gains, but less of a 'risk-off' reaction from FX markets, so far," analysts at Lloyds Bank wrote in a report.
"We are now near fully pricing in three hikes this year and rising speculation of four."
MSCI's emerging market index fell 1.2 percent, capping the biggest two-day decline since May.
Losses in Latin America were less extreme, with MSCI's regional index down 0.2 percent. Still, Argentina's benchmark Merval stock index tumbled 3 percent to a one-month low, extending a year-long trend of sharp oscillations.
Brazil's benchmark Bovespa stock index was nearly flat, supported by rising shares of miner Vale SA in the wake of higher iron ore prices.
Shares of blue-chip banks Ita? Unibanco Holding SA and Banco Bradesco SA turned higher, erasing earlier losses, as traders continued to ponder the likelihood the government would pass a key plan to cut social security spending.
A cabinet minister said on Monday the government was still 40 votes short of the 308 needed to approve the unpopular bill in the lower house of Congress. Investors see the measure as key to boosting long-term growth.
Nevertheless, the official said he was confident the bill would be approved this month as 80 to 100 lawmakers have not yet made up their minds.
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