BRASILIA: Most Latin American assets were swept up in a global risk-off wave on Friday, putting stocks on track for weekly losses as a pullback in tech shares and US-Iran hostilities dented risk appetite.
MSCI’s Latin American equity index edged 0.4 percent lower, while the region’s currencies also weakened 0.4 percent against the dollar.
Tensions in the Gulf region intensified after US strikes on Iran, with Tehran saying it had closed the Strait of Hormuz this week, after a fragile ceasefire agreement collapsed.
Energy infrastructure in the Gulf was hit, raising uncertainty over global energy security.
Oil prices rose more than 2 percent to their highest levels in over a month, while shipping data showed only three ships passing through the crucial waterway on Thursday.
“It affects Latin America primarily through two channels: global risk appetite and energy prices. If the conflict remains contained … the region should be able to coexist with it,” said Alejo Czerwonko, chief investment officer of EM at UBS Global Wealth Management.
“In that scenario, global financial conditions would likely remain resilient while energy prices stay relatively elevated.”
In Brazil, the government authorized a nearly
USD2.6 billion credit package for the rural sector, which would be hit by Washington’s latest 25 percent tariffs.
It is also considering other retaliatory measures, including suspending patent protections for US pharmaceutical products and agricultural seeds.
The tariffs come ahead of Brazil’s October election, for which the latest opinion polls show President Luiz Inacio Lula da Silva outpacing conservative Senator Flavio Bolsonaro.
Equities in Brazil weakened 0.2 percent, while the Brazilian real also fell 0.2 percent. Separately, data showed economic activity in the region’s largest economy grew slightly more than expected in May, reinforcing expectations of further rate cuts.
Most equities in the region were hit by the risk-off momentum. Stocks in Chile dropped 0.5 percent, tracking falling prices of copper.
Colombian stocks were flat while Peruvian equities dipped 0.1 percent.
However, Czerwonko said equity markets in the region were still attractively valued and continued to be supported by earnings growth in several countries.
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