Latin American markets had a tepid start on Monday with Brazilian assets subdued as economic worries eclipsed optimism from pensions reform hopes, while currencies in the region were mixed with Argentina's peso dropping on a Moody's outlook cut.
The Sao Paulo index was flat while the real slid 0.3pc lower.
Economists cut their 2020 growth forecasts for Latin America's largest economy to a new low, despite Brazil's Congress delivering a major breakthrough on pension reform that most analysts say should boost business sentiment and activity.
"There is little doubt that the economy remained weak in the second quarter and we still expect a flat Q2 reading," said Mauricio Oreng, senior Brazil strategist, Rabobank.
Intense discussion over amendments to the pension reform bill, a key to bringing the economy back on track, delayed the second round of voting to August and reduced the projected savings to 900 billion reais ($240.10 billion) over from 1 trillion reais initially estimated.
"A gradual improvement in activity can be seen from 19H2 onwards, on the heels of easier financial conditions (expected BCB rate cuts) and less negative economic sentiment (the approval of an effective pension reform)," Oreng said.
Political uncertainty over upcoming reform plans in Brazil will continue to cast a shadow over the outlook of Latin America's biggest economy, a Reuters poll of analysts showed.
Mexican stocks and the peso both climbed higher while Chile's peso gained ground on higher copper prices, the country's top export.
Argentina's stocks as well as the peso underperformed its peers after ratings agency Moody's changed the economy's outlook to negative from stable over the weekend, citing rising uncertainty about economic policy and risk of additional "damaging currency shocks."
Moody's decision comes a little more than three months before the country's presidential elections in which President Mauricio Macri, seeking a second term, is being challenged by Alberto Fernandez, who has former populist president Cristina Fernandez de Kirchner on his ticket.
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